The grounding of the container vessel Ever Given in the Suez Canal in a highly-publicised incident late last year demonstrated how a major strategic axis for world trade and navigation can become a chokepoint, French reinsurers SCOR said in a recent statement on its website.
“The grounding has shown the world the hidden reality of our economic system,” says Sylvain Gauden, Chief Underwriting Officer for Marine and Energy Reinsurance at SCOR. “By now, we all pretty much know what happened.”
SCOR said a sandstorm, poor visibility, a strong south wind, and some miscommunication combined to cause the ship to accelerate in the narrow, 200-kilometre-long channel, rendering it unmanoeuvrable. The ship then slipped from one side to the other, finally lodging sideways across the canal and blocking the route.
SCOR added that every day that Ever Given blocked the canal, dozens of ships carrying billions of dollars’ worth of cargo were blocked from crossing the waterway. As many as 400 ships were blocked in total, and it took six days and an intensive international rescue operation to release the vessel.
Many shipping companies were considering – and even embarking on – an alternate route via the Cape of Good Hope, despite the implications of this lengthy, and costly, diversion. Nonetheless, many argue, it could have been much worse. No one was injured or killed, and the ship could have been grounded for much longer.
SCOR said that in the Ever Given incident, matters were complicated by the fact that the parties involved – the shipowner, the charterer, the owners of the goods, even the Suez Canal – have insurance policies originating from all over the world. All seek to recover at least some of their losses. The claims include physical damage (to the ship itself), loss of revenue (on the part of the Suez Canal Authority), the cost of the salvage operations and business interruption (for owners and charterers of the blocked vessels), loss of perishables and cargo delays, as well as damage to the canal itself – and these are just some of the claims that will need to be considered.
“Understanding the consequences of such an event means taking a holistic view,” said Gauden. “Who are the stakeholders? Which insurance policies can respond? What is their exposure? How much is this going to cost? All branches of marine insurance are concerned, and the interests are multiple and sometimes divergent.”
SCOR concluded that it will take many years to settle the claims from the Ever Given incident and the process will include much debate about who is liable. Reinsurers will have to absorb the bulk of the claims, which the company says could amount to more than US$2 billion.
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