Shipping Companies Counting Cost of Suez

Chaos
March 29, 2021

Ship Ever Given, one of the world's largest container ships, is seen after it was fully floated in
Suez Canal, Egypt March 29, 2021. REUTERS/Mohamed Abd El Ghany

LONDON, March 29 (Reuters) – The owners and charterers of ships unable to sail

through the Suez Canal for nearly a week face at least $24 million in expenses they will
be unable to recoup as their insurance policies do not cover them, industry sources
say.

Up to 400 ships, which include oil tankers and vessels carrying goods to consumers
that had been stuck, are counting the cost after traffic through Egypt’s Suez Canal was
halted for six days.

A giant container ship that had blocked the waterway since March 24 was refloated on
Monday, the canal authority said.

Ships typically have various types of insurance, including protection & indemnity (P&I)
for pollution and injury claims. Separate hull and machinery policies cover vessels
against physical damage.

“Both exclude loss of earnings,” Claudio Blancardi, underwriting director with ship
insurer Nordic Marine, said.

Shipping sources said daily expenses were estimated to reach between $10,000
to $15,000 a day for each vessel and it would have to be written off. This includes oil
tankers.

“Tanker owners don’t get paid demurrage (delay costs) for canal delays, they incur the
waiting days and cost on their own account,” one shipping source said on condition of
anonymity.

Apart from ship owners, charterers of ships who hire the vessel for an extended period
would also be unable to claim back losses, leaving them also having to cover these
costs, the sources said.

They could also face more than six days of lost expenses as the traffic jam of ships
makes its way down the canal.

These expenses include additional fuel costs, lost days when the ship was unable to
complete its voyage and extra supplies.

“It’ll take days rather than a day to clear the backlog,” William Robinson, a managing
director at insurance firm Charles Taylor, said.
CARGO OWNERS
Owners of cargo on the Ever Given container ship or other ships delayed in the Canal
may also not be covered by insurance.

“Generally, if you are shipping anything other than perishable cargo, you don’t buy
delay insurance,” Marcus Baker, global head, marine and cargo, at insurance broker
Marsh, said.

Fitch Ratings said on Monday that reinsurers could face losses totalling hundreds of
millions of euros from the blockage.

However, industry sources said insurance and reinsurance claims would likely mainly
be for damage to the Ever Given itself and to the Canal, as well as dredging costs.

UK Club, the P&I insurer for the Ever Given, said in a statement on Monday it had
insured the ship’s owner Shoei Kisen for “certain third party liabilities that might arise
from an incident such as this – including, for example, damage caused to infrastructure
or claims for obstruction.”

The ship’s hull is insured by Japan’s MS&AD Insurance Group. Industry sources said
the hull policy would also cover the salvage costs.

Brokers reckon the ship will have been insured for $100-140 million. (Editing by
Barbara Lewis)