The grounding of an ultra large container ship - the Ever Given - in the Suez Canal brought traffic on the central shipping route between Europe and Asia to a standstill, with the potential to create more than $40bn dollars of trade disruption.
From an insurance perspective, it is still too early to determine the types of losses that will be involved in this incident, as there are a number of contributing factors cited in various reports. “However, the potential loss scenarios could include damage to the vessel and the canal, salvage and removal costs, which can quickly escalate, loss of any perishable goods in cargo and business interruption and loss of revenue, as a result of this blockage,” said Allianz Global Corporate and Specialty (AGCS) APAC head of marine cargo Michel Muganza.
“It is still too early to determine the financial impact and how long the blockage will last as this is dependent on several factors such as logistical challenges, weather, accessibility and these factors are difficult to predict at this early stage,” he said.
With regards to cargo, it is also too early to estimate losses as there are around thousands of containers on board the Ever Given and it could mean there are many insureds involved. Insurers also have to take into account other vessels that are impacted by this blockage and the potential losses from cargo which could add to potential claims and losses.
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Ship trackers and brokers said there were more than 100 ships waiting to transit the canal. The traffic jam comes at a particularly bad time for global supply lines. Car and computer makers are straining from a global chip shortage, exacerbated by a fire in a big chip making factory in Japan last week. Car makers have closed plants after a Texas cold snap earlier last month negatively impacted plastics production, and California ports have been hit by backlogs and delays.
It is estimated that the grounded vessel will take weeks to be moved, and supply chains must be rerouted, although which alternative route shipowners decide will be dependent on its cost-effectiveness.
“It is important to note that Ever Given is an ultra large container carrier with a capacity to over 20,000 TEUs. By her size she is among the largest 1% of the container ships in the world. Due to the large profile of these vessels and the containers stowed on deck the windage area is quite extensive compared to other ship-types. Because of the large windage area, cross winds cause considerable force on the vessel and can easily cause small deviations in the vessels track. The canal waters are very narrow and leave very small room for these kinds of deviations,” said AGCS senior risk consultant Captain Nitin Chopra.
Nearly 19,000 ships passed through the canal in 2020, according to the Suez Canal Authority - an average of 51.5 ships per day. The Suez Canal has an excellent safety record overall with shipping incidents extremely rare - There have been 75 reported shipping incidents in total in the canal over the past decade according to the AGCS Safety & Shipping Review 2020. More than a third involved container ships.
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