Insurance Jottings

Marine insurers to avoid ‘black swan event’ as Ever Given refloated

Marine insurers look set to avoid worst-case scenario losses from events in the Suez Canal as the Ever Given has been freed from the shoreline after nearly a week blocking the trade route.

The ship’s owner, Japanese firm Shoei Kisen KK, and its insurers face claims from the SCA for loss of revenue and from other ships whose passage has been disrupted, insurers and brokers said.

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

The cost of the salvage operation is also borne by the hull and machinery insurer.

“It is potentially the world’s biggest ever container ship disaster without a ship going bang,” one shipping lawyer, who declined to be named, said.

Martijn Schuttevaer, spokesman for Dutch marine services company Boskalis, told Reuters its subsidiary Smit Salvage had been hired to help with the operation. A team of around  people is in  Egypt.

Supply Chain Issues

In addition, owners of the cargo on board the ship and on other ships stuck in the Canal will likely claim from the ship’s liability insurer for losses to perishable goods or missed delivery deadlines, the sources said.

“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 said that it was the protection and indemnity insurer for the Ever Given, but declined to comment further. This segment of insurance covers ships against pollution and injury claims.

The bulk of those insurance claims will then likely be reinsured through a programme run by the wider International Group of P&I Clubs, David Smith at McGill said.

At least 30 ships were blocked to the north of the Ever Given, and three to the south, local sources said. Several dozen ships could also be seen grouped around the northern and southern entrances to the canal.

Analytics firm Kpler said more than 20 oil tankers carrying crude and refined products were affected by the disruptions.

Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty (AGCS), said there could also be claims for damage to the canal. Photos shared by the SCA showed a digger removing earth and rock from the bank of the canal around the ship’s bow.

Groundings are the most common cause of shipping incidents in the canal, with 25 in the past ten years, according to AGCS.

However, insurers look unlikely to face claims for spillage into the canal. Bernhard Schulte Shipmanagement, the vessel’s technical management company, said there were no reports of pollution.

City of London Is Realising that EU Will Limit Access for Financial Services

There is a growing realisation that Britain should not wait for unlikely European Union access for financial services but get on with building a more competitive City of London, a senior lawmaker said on the 25^th March.

Britain left the bloc’s orbit in December and its new trade deal with the EU does not include financial services.

Jonathan Hill, the former EU financial services commissioner who authored a report this month into easing UK listing rules, said he does not expect Brussels to grant any significant access to the City. “A broader realisation that that isn’t going to happen is spreading through the market,” Mr Hill told a Centre for Policy Studies think tank event.

The shift in euros share trading from London to Amsterdam in January “crystallised” minds, Mr Hill, a member of Britain’s upper house of parliament, said.

“The worst possible thing you can do is just sit there and hope the Europeans will come to our rescue,” he said.

“The politicians, the regulators and the market are now broadly aligned about the need to get on with constructing a more, nimble, competitive, dynamic regulatory future for the City.”

City minister John Glen has said he will publish proposals later this year on making Britain’s capital market more attractive and competitive.

Clare Cole, the Financial Conduct Authority’s director of market oversight, said Brexit created an opportunity for a bottom up review of primary market rules and the challenges the City faces.

“We are not looking for change for the sake of change, we are not looking for quick fixes or seeking low standards,” Ms Cole said.

FCA recommendations on changing listing rules will be put out to public consultation soon, she said, adding there were other areas for potential reform like prospectuses and the bond market.

“It’s mad that retail investors are not able to participate in really good quality bond offerings,” she said.