Suez Canal blockage could lead to $100m in insurance claims

Canal authority chairman estimates it lost $12m-$15m of revenue per day

This satellite imagery released by Maxar Technologies shows a close up overview of the MV Ever Given container ship and tugboats in the Suez Canal. AFP / Maxar Technologies

The guided-missile cruiser USS Monterey (CG 61), left, and the guided-missile destroyer USS Thomas Hudner (DDG 116) sail behind the aircraft carrier USS Dwight D. Eisenhower (CVN 69) during a Suez Canal transit, in this picture taken April 2, 2021 and released by U.S. Navy. Reuters

In this photo released by Suez Canal Authority, the Ever Given, a Panama-flagged cargo ship, is pulled by one of the Suez Canal tugboats, in the Suez Canal, Egypt. AP Photo

A spectator waves as the Ever Given container ship moves along the Suez Canal towards Ismailia after being freed from the canal bank in Suez, Egypt. Bloomberg

A man waves at the Panama-flagged MV 'Ever Given' container ship as it is tugged in Egypt's Suez Canal after it was fully dislodged from the banks, near Suez city. AFP

A view shows Ever Given container ship in Suez Canal in this Maxar Technologies satellite image. Satellite image ©2021 Maxar Technologies/Handout via Reuters

A handout photograph made available by the Suez Canal Authority shows the Ever Given container ship after it was refloated in the Suez Canal, Egypt. EPA

A handout photograph made available by the Suez Canal Authority shows the Ever Given container ship after it was refloated in the Suez Canal, Egypt. The head of the Suez Canal Authority announced on 29 March that the large container ship, which ran aground in the Suez Canal on 23 March, is now free floating after responding to the pulling maneuvers. EPA

People watch Ever Given, a Panama-flagged cargo ship, that has been stuck sideways and blocked traffic in Egypt's Suez Canal, move past after it was set free by salvage teams. AP Photo

People watch as the container ship 'Ever Given' is refloated, unblocking the Suez Canal in Suez, Egypt. This morning the container ship came partly unstuck from the shoreline, where it ran aground in the canal last Tuesday, and later resumed its course shortly after 3pm local time. Getty Images

A view of the Panama-flagged MV 'Ever Given' (operated by Taiwan-based Evergreen Marine) container ship, a 400-metre- (1,300-foot-)long and 59-metre wide vessel, as it remains lodged sideways impeding traffic across Egypt's Suez Canal waterway. AFP

Ship Ever Given, one of the world's largest container ships, is seen after it was fully floated in Suez Canal, Egypt. Suez Canal Authority/Handout via Reuters

The container ship 'Ever Given' is refloated, unblocking the Suez Canal in Suez, Egypt. This morning the container ship came partly unstuck from the shoreline, where it ran aground in the canal last Tuesday, and later resumed its course shortly after 3pm local time. Getty Images

The container ship 'Ever Given' is moving in the Suez Canal, Egypt. The Suez Canal Authority on 29 March said that traffic is to resume after the large container ship 'Ever Given' was refloated. EPA

Insurance claims related to the blockage of the Suez Canal for almost a week are expected to be in excess of $100 million, according to experts.

Ever Given, the 200,000-tonne ship carrying 20,000 containers, got stuck in the Suez Canal on March 23 after high winds blew it off course, blocking a vital waterway for global trade. Although the ship was refloated on Monday, the backlog of vessels on either side of the busy waterway connecting Europe and Asia is expected to take three days to clear.

"We estimate insurance cost claims in excess of $100m, relating principally to delays to cargo delivery, the Suez Canal Authority's claim for loss of revenue and the actual cost of removing the ship," Martin Dixon, director and head of research products at UK-based shipping consultancy Drewry, told The National.

The Suez Canal Authority, which owns and operates the canal, is expected to have lost more than $95m in fee revenue during the six days the waterway was blocked, according to financial data company Refinitiv. At least 400 ships were stranded on either side of the canal following the incident.

“The main type of claim outside the removal cost of the ship itself will be cargo owners’ claims against the shipping line [Evergreen] relating to delayed delivery of the containers on the Ever Given. The shipping line may, in turn, claim against the ship owner and the latter the technical manager. All such claims will be made via insurers,” Mr Dixon said.

The ship is owned by Japanese company Shoei Kisen and is operated by Evergreen Marine of Taiwan.

The Suez Canal Authority's chairman, Adm Osama Rabie, said it "is not to blame for the incident,” at a news conference on Monday night.

“We are the injured party,” he added, saying the canal suffered $12m-$15 per day in lost revenue.

A total of 18,597 ships made the transit through the canal in 2020 with 50 ships passing through it every day.

“As we speak now, it is difficult to predict what the overall insurance losses would be,” Capt Abhijit Naik, Middle East and North Africa marine practice leader at global insurance broker Marsh, said.

However, he said the biggest claims will come from ships that were delayed as a result of the blockage or the canal authority.

“Ships which were stuck can claim for their loss of revenue," he said, arguing that the ship owner was the most likely recipient of claims.

The incident has put additional pressure on the global supply chain, which was already impacted due to the coronavirus pandemic, Capt Naik added.

“The world should be more equipped to salvage these kinds of vessels if and when something goes horribly wrong.”

Fitch Ratings said the incident is also likely to trigger losses in the reinsurance industry.

"This event will reduce global reinsurers’ earnings but should not materially affect their credit profiles, while prices for marine reinsurance will rise further as a consequence," the ratings agency said.

How the 'Ever Given' blocked the Suez Canal for almost a week - in pictures