‘Suez Canal incident losses manageable for insurers, reinsurers’
Published on: Friday, April 02, 2021
By: Bernama
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Container ship Ever Given, which recently clogged the Suez Canal, is owned by Shoei Kisen Kaisha Ltd. (AFP)
Kuala Lumpur: Losses related to claims on delayed ships’ own insurance policies and manufacturers’ business interruption policies following the incident involving the Ever Given’s grounding in the Suez Canal are expected to be relatively small, Moody’s Investors Service said.

Much of the liability and business interruption coverage that could apply in this case required the loss to be related to physical damage, it said.

“Additionally, much of the business interruption coverage generally has a deductible period where claims are only paid if business is suspended more than that certain period,” the rating agency said in a statement.

Moody’s said the accident was credit negative for (re)insurers which still faced considerable uncertainty around the exposure from the event but the resumption of traffic at the canal was positive as it reduced the risk of significant and broad losses beyond those directly resulting from the event.

“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,” it said.

Moody’s said while Ever Given was owned by Shoei Kisen Kaisha, Ltd, a Japanese company, this accident at current scale would have only limited financial and credit impact on rated Japanese property and casualty (P&C) insurers because of the lack of significant damage to the ship.

The rating company said marine accidents could result in insurance losses via hull coverage in addition to cargo and marine liability coverages discussed above.

 Regarding hull insurance, the Japanese P&C insurance industry commonly uses coinsurance with multiple large domestic insurers supplemented by reinsurance to cover large hull exposures.

Moody’s said such arrangement limited the risk exposure for individual insurers and allowed the loss 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 Ever Given or other neighbouring vessels or an exceptionally expensive rescue effort.

 “Key hull coverage generally includes repair cost of damage of an insured ship and other ships (if any), coverage for salvage costs such as moving a damaged ship to a safe place, loss of time insurance which covers lost profit of the insured ship during the suspension to its operation,” Moody’s said.

It said similar to pure reinsurers, Japanese insurers could also face liability claims associated with UK P&I Club from their reinsurance subsidiaries overseas.

“However, we expect the losses are manageable and their credit impacts are lower than those of pure reinsurance companies because reinsurance business is not a major part of the Japanese insurers’ businesses,” it said. 


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