Insurance Jottings

Gallagher acquires Nordic marine and energy broker Parisco

Arthur J Gallagher has expanded its Nordic marine capabilities with the acquisition of Oslo-based marine and energy broker Parisco AS.

 

Suez Canal Must Upgrade to Avoid Future Shipping Disruption: Sources

Article in The Insurance Journal

 

Egypt’s Suez Canal must move quickly to upgrade its technical infrastructure if it is to avoid future shipping disruption, shipping industry sources said, as the major trade route tries to bounce back from a costly six-day closure.

 

International supply chains were thrown into disarray on the 23rd March when the 400-metre-long (430-yard) container ship Ever Given ran aground in the canal, with specialist rescue teams taking almost a week to free her after extensive dredging and repeated tugging operations.

 

Egypt will get two new tugboats, one next week and one in August, Suez Canal Authority (SCA) chairman Osama Rabie said after the ship was finally freed, as well as taking the biggest dredger in the Middle East and arranging for a further five new Chinese tugboats.

 

But shipping industry sources said specialist equipment and associated procedures have long struggled to keep up with the ever increasing size of commercial vessels.

 

“The average size of most vessels has increased exponentially over the last 15 years. The ability to salvage these bigger ships has not,” said Peter Townsend, a marine insurance industry veteran.

 

“The issue is getting containers off essentially a 20-story high building at sea.”

 

Michael Kingston, an international shipping specialist and an adviser to the United Nation’s International Maritime Organisation, flagged such problems in 2013, three years before the MSC Fabiola container ship ran aground, also blocking traffic for days.

“The obvious way to lighten a vessel … is to take the containers off. They had no way of doing it. No equipment was readily available,” he said of the Ever Given incident.

Lessons Learned

The SCA says the canal can safely take vessels of the Ever Given’s size – with a maximum capacity of 20,000 TEU (20-foot containers) – even in rough weather.

 

As well as bigger tugboats, dredgers and off-loaders, stricter guidelines on how ships transit the canal are needed, the industry sources said. Those could include using tugs to assist large vessels, or only permitting transit during daylight hours.

 

“Of course, there are many lessons learned from the (Ever Given) incident. Of course we have the capabilities,” the SCA’s Rabie said.

 

Visiting the canal this week, Egypt’s President Abdel Fattah al-Sisi said: “We have to give a strong message to the world that the Suez Canal … can transport world trade at this rate or more.”

It was not clear yet if the Canal would opt to extend a second channel south of the one which Egypt opened in 2015 at a cost of US$8 billion along a 70-km portion of the waterway. Such an extension would allow traffic to continue flowing even if a ship were grounded.

 

“An expansion for the southern section of the canal can be under consideration,” Mr Sisi said. “It’s up to the technical people. We don’t want to take measures just due to extraordinary situations.”

 

Suez Blockage Claims Expected to Hike Marine Reinsurance Rates

The blockage of the Suez Canal is likely to lead to large reinsurance claims, adding to upward pressure on marine reinsurance rates, James Vickers, chair of reinsurance broker Willis Re International, told Reuters.

 

Formal investigations began this week into how the giant container ship Ever Given ran aground in the canal, shutting down shipping in the major global waterway for almost a week.

 

The incident and its impact on hundreds of ships delayed in the canal would be a “large loss” for insurance market Lloyd’s of London, its chairman Bruce Carnegie-Brown said, while Fitch Ratings said global reinsurers were likely to face hundreds of millions of euros of claims.

 

Mr Vickers also said reinsurance losses were “not going to be a small amount of money.”

 

The blockage was the latest in a growing number of man-made disasters leading to reinsurance losses, on top of a list of natural catastrophes in the past year, he said.

 

Reinsurers help insurers cover claims for major events such as hurricanes, in return for part of the premium. Reinsurers typically raise rates after they experience large losses.

 

Even before the Suez incident, the marine market “didn’t need much encouragement to keep going in an upward direction,” Mr Vickers said.

 

Global marine reinsurance rates were generally seeing “high single digit” percentage point increases, Willis Re said in its April reinsurance renewals report on the 1st April.

 

Marine reinsurance premiums have been rising for the past few years after several years of falling rates, as Lloyd’s  and other firms have cut back on loss-making lines, reducing competition. The COVID-19 pandemic has also put upward pressure on reinsurance rates across the board.

Elsewhere, the US property reinsurance market has been hit by a number of catastrophes including Winter Storm Uri in the United States in February, with rates up by as much as 25% in April, the report showed.