Insurers face massive bills following Suez Canal blockage
Shoei Kisen KK, the Japanese firm that owns the stricken Ever Given tanker blocking the Suez Canal, could be liable for millions of dollars of insurance claims due to mounting costs caused by the crisis.
On-site news of the salvage operation show that despite efforts to dredge underwater silt and sandbanks and an army of tug boats, the 1,312 foot long cargo ship remains aground at both ends. The financial fallout from the disaster is spiralling as high as £9.5bn per day, reports suggest.
The Ever Given is currently being operated by the Taiwanese company Evergreen Marine and is beached across the southern entrance of the canal. The event is stopping other container ships from passing through the famous waterway - which is one of the world's busiest shipping lanes.
A crack salvage team from the Netherlands has now been contracted to join the operation following failures to move the cargo ship.
The operation will be led by Smit Salvage, a subsidiary of the Dutch marine services company, Boskalis, and the company has sent a team of 10 experts to the site.
The canal blockage occurred on Tuesday when the 224,000 ton vessel hit sandbanks. The Ever Given is said to be insured in the Japanese market for $137.7m against hull and machinery damage.
The cost of the salvage operation is being borne by the hull and machinery insurer. According to Reuters, a statement released by the UK P&I Club - the protection and indemnity insurer for the Ever Given, confirmed its connection to the stricken Japanese vessel, but declined to comment on any other details.
The UK P&I Club is one of the oldest shipping brokers in the world. It provides P&I insurance in respect of third party liabilities and expenses, arising from owning ships or operating ships as principals.
But, the most expensive fallout from the crisis by far will be the delivery delays caused by the incident.
Cargo owners, whose perishable goods are stuck on the ship, along with claims for missed delivery deadlines from other ships that are halted due to the incident, are swiftly mounting.
Many vessels are being rerouted around South Africa’s Cape of Good Hope. However, this detour adds an extra 6,000 miles to the European shipping route and increases fuel costs by $300,000 per supertanker.
Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty (AGCS), also told press there could be claims made for damage to the canal.
Reports show that containerised goods make up an estimated 26% of the canal's daily traffic.
- Delays to westbound traffic could cost approximately $5.1bn
- Restricted shipping the other way could cost $4.5bn
- Daily costs of the Suez blockage amount to $9.6 billion
Insurance claims and disruptions
- Perishable items claims
- Missed delivery deadlines claims
- Business compensation claims for undelivered goods
- Canal damage
- Re-routing costs for the 6,000 mile longer journey around the Cape
- Additional fuel bills of $300,000 per supertanker that is re-routed
- Approximately 30 tankers are currently blocked in the canal
- A further 20 oil tankers carrying oil and refined products are delayed
- Seesawing crude oil prices due to complicate the matter as a result of the crisis-caused supply issues and pandemic restrictions
First time blockage
The disaster is the first of its kind to hit the troubled waterway, which has, throughout its history, been a source of international conflict. Marcus Baker, global head of marine and cargo at Marsh, the global professional services firm that specialises in insurance brokerage and risk management, explained, “If you have a constant build-up of ships, there are massive supply chain issues.”
One shipping lawyer, who declined to be named, described the events as “Potentially the world’s biggest ever container ship disaster without a ship going bang."
Shoei Kisen KK and Evergreen Marine have have so far been unavailable for comment.
Image credits: Reuters , Airbus DS, BBC
Global investment in insurtech reaches all-time high
Global investment in the InsurTech sector reached an emphatic record during H1, 2021, as half-year funding of US$7.4 billion exceeded full-year investment in 2020, and in every other year, according to the new Quarterly InsurTech Briefing from Willis Towers Watson.
It was found that the latest quarter saw 162 deals yield more than $4,824 million in investment, a 210% increase over Q2, 2020. The enormous quarterly total, itself more than any annual total before 2019, was driven largely by 15 mega-rounds of $100 million or more. Collectively, these deals reached $3.3 billion, or two-thirds of total funding during the quarter. The money was raised predominantly by later-stage players seeking expansion.
A need for the insurance community to reflect digital changes
Series B and C fundraisings drove a large number of deals in the second quarter, but the number of early-stage deals also increased. They were up by more than 9% from the previous quarter, and 200% from pandemic-stricken Q2, 2020. As a percentage of overall deals, early-stage activity held roughly steady, at 57%.
InsurTechs focused on distribution accounted for 55% of start-up deals, and for 10 of the 15 mega-rounds. Most of the distribution InsurTechs target reduced dependence on agent channels. Of all Q2 deals, 73% were for P&C-related InsurTechs, while 43 companies raised funds for L&H technology. Funds were raised by companies from 35 countries, including new entrants Botswana, Mali, Romania, Saudi Arabia, and Turkey.
Dr. Andrew Johnston, global head of InsurTech at Willis Re, said: “As technology changes our lives, society will demand an insurance community that reflects and supports our changing, digitally empowered behaviours. Consumers and businesses increasingly expect insurance to be delivered when and how they want it, and risk carriers that fail to respond will fall away over time. To embrace technology is a minimum survival condition. Those that use it to redefine service in the insurance world will thrive. That means a positive future for InsurTechs that bring a truly differentiated business approach to our industry. Some of them will create untold long-term opportunities for themselves and the insurance sector.”