Suez Canal Grounded Ship To Face Insurance Claims Worth Millions

The pandemic hit the shipping world is already grappling with tremendous congestions and traffic when the Suez Canal event hit them. The maritime industry is staring at a huge delay and backlog due to stranded Evergreen stuck in the Suez Canal.

The owners and insurers of the ships stuck in this logjam are staring at lawsuits and claims amounting to millions of dollars. Experts fear that a loss is inevitable as claims are bound to arise. Even if the evergreen ship is refloated quickly there will be some delay in transit and hence the claims.

The 400 m ship ran aground in the Suez Canal earlier on Tuesday morning, halting ship movements in the area. As per the statement issued by the Suez Canal Authority, the ship couldn’t steer its way out of the dust storm and high winds, and ran aground. Global Shipments would be delayed for days because of this blockage.

Image Credits: suezcanal.gov.eg

As of Wednesday afternoon, the vessel is still aground and authorities are still trying to free it. Earlier reports emerged of the ship being partially refloated but that turned out inaccurate.

Insurance Claims Worries the Stranded Ship

Suez Canal is an important shipping route that acts as a daily transit point for 30% of global container shipping volumes. Without this, ships have to take the African Cape route to travel between Asia and Europe which takes a week longer.

The owner of the grounded ship, the Japanese firm Shoei Kisen KK along with their insurers are in deep waters as the Suez Canal can claim for revenue loss.

“All roads lead back to the vessel,” said David Smith, head of marine at insurance broker McGill and Partners.

“Container ships of this size are likely insured for hull and machinery damage of $100 million to $140m, insurance sources say. The ship was insured in the Japanese market”, two of the sources said.

The salvage operation costs have to be borne by the hull and machinery insurer.

“It is potentially the world’s biggest ever container ship disaster without a ship going bang,” said a shipping lawyer choosing to stay anonymous.

At present Smit Salvage, a subsidiary of the Dutch marine services company Boskalis is entrusted with the salvage operation. The company is sending a 10 membered team to Egypt for this purpose.

Oil Price & Supply Chain Issues

Meanwhile, the cargo owners of ships stuck in the logjam will be pressing for claims for missed deliveries and loss of perishable goods.

“If you have a constant build-up of ships, there are massive supply chain issues,” said Marcus Baker, global head, marine and cargo at insurance broker Marsh.

UK P&I Club, the protection and indemnity insurer for the grounded ship Ever Given haven’t made any official statement as of yet. Their insurance cover has injury claims, pollution claims under the ambit. Hence these insurance claims have to be reinsured through a programme run by the wider International Group of P&I Clubs.

At present, 30 ships are blocked north of the grounded ship and 3 are down south. Dozens more could be implicated around the northern and southern entrance of the Suez Canal.

20 oil tankers carrying crude and refined products are already affected by this. New Zealand cargo is held up in the blockage.

David Robb, a supply chain management professor at the Auckland University revealed that the congestion and traffic in shipping routes has increased oil price by 6% and the Suez Canal blockage will elevate it further.

“Shipping schedules have quite limited slack and lots of ports including those in New Zealand are already facing weeks of delay” said David Robb.

Threat of Canal Damage

Added to this, there’s a potential threat of damage to the canal. Photos reveal that the port authority had to employ a digger to remove earth and rock from the canal bank to free the ship’s now.

There could be claims for damage to the canal, said Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty (AGCS).

According to AGCS, groundings are the most common shipping incident in the Suez Canal. The canal has had 25 groundings in the last 10 years.

Insurers are not worried about any spillage or pollution claims in the canal at this moment. The technical management company Bernhard Schulte Shipmanagement that is looking after the grounded ship has ruled out pollution claims stating there isn’t any pollution

Reference: indiatimes.com

Source: Maritime Shipping News