KUALA LUMPUR – Losses related to claims on delayed ships’ insurance policies and manufacturers’ business interruption policies following container vessel Ever Given’s grounding in the Suez Canal are expected to be relatively small, said Moody’s.
The ratings agency, in a statement today, said much of liability and business interruption coverage requires the losses to be related to physical damage.
“Additionally, much of the business interruption coverage generally has a deductible period, where claims are paid only if business is suspended for more than a certain period.”
The incident is credit negative for reinsurers, which still face considerable uncertainty around the exposure from the event, but the resumption of traffic at the canal is positive, reducing the risk of significant and broad losses beyond those directly resulting from the waterway’s blockage, it said.
“While we expect the ultimate loss to be manageable for most insurers and reinsurers, it comes on the back of a number of large loss events for some insurers and reinsurers in the first quarter of 2021, including winter storm Uri in the United States and flooding in New South Wales, Australia, which will place sector earnings under pressure, particularly for reinsurers.”
While the Ever Given is owned by Shoei Kisen Kaisha Ltd, a Japanese company, the incident, at the current scale, will have a limited financial and credit impact on rated Japanese property and casualty (P&C) insurers due to a lack of significant damage to the ship, said Moody’s.
It said marine accidents could result in insurance losses via hull coverage, in addition to cargo and marine liability coverage.
On hull insurance, the Japanese P&C insurance industry commonly uses coinsurance with multiple large domestic insurers, supplemented by reinsurance to cover large hull exposures, it said.
It added that such an arrangement limits the risk exposure for individual insurers, and allows the losses to be shared among many insurers and reinsurers.
“In this case, hull-related losses are likely to be small because the accident has not resulted in significant physical damage to either the Ever Given or neighbouring vessels, or an exceptionally expensive rescue effort.
“Key hull coverage generally includes the repair cost for damage to an insured ship, and other ships, if any; coverage for salvage costs, such as moving a damaged ship to a safe place; and, loss-of-time insurance, which covers the lost profit of the insured ship during the suspension of its operations.” – Bernama, April 1, 2021
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