Reinsurance Payouts Expected to Cost Hundreds of Millions in Suez Canal Blockage

About 400 vessels were impacted by the closure of the canal. (AP)
About 400 vessels were impacted by the closure of the canal. (AP)
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Reinsurance Payouts Expected to Cost Hundreds of Millions in Suez Canal Blockage

About 400 vessels were impacted by the closure of the canal. (AP)
About 400 vessels were impacted by the closure of the canal. (AP)

Reinsurers will likely bear most of the expense for the grounding of a giant container ship that halted shipping traffic through the Suez Canal last month. Payouts are expected to cost hundreds of millions of dollars.

International shipping through the canal ground to a halt when the 400-meter Ever Given ran aground and blocked the canal on March 23. It took nearly a week for rescue teams to free the vessel.

About 400 vessels were impacted by the closure of the canal, with some having to take the much longer route around Africa to deliver their cargo.

Ships usually have protection and indemnity (P&I) insurance, which covers third-party liability claims. Separate hull and machinery insurance covers ships against physical damage.

Alan Mackinnon, chief claims officer for UK Club, the Ever Given’s P&I insurer, told Reuters that the club expected a claim against the ship’s owner from canal authorities for possible damage to the waterway and loss of revenue. The club also expects separate claims for compensation from the owners of some of the delayed ships.

“I expect we will get a claim from the Egyptian authorities quite soon, and the claims from the other shipowners will trickle in over the coming months,” Mackinnon said.

Osama Rabie, chairman of the Suez Canal Authority, said last month that losses and damages from the blockage could hit around $1 billion, although the actual amount would be calculated after investigations are completed.

The UK Club will cover the first $10 million in P&I losses, Reuters reported. After that, a wider pool of P&I insurers will cover up to $100 million. At that point, reinsurers would step in to cover up to $2.1 billion in claims, and P&I insurers would contribute for part of a further $1 billion in coverage, according to Reuters.

When asked if claims could reach the upper limits of coverage – around $2.1 billion to $3.1 billion – Mackinnon told Reuters that “We are confident we are not in that territory at all.”

“This is not an existential moment for the P&I sector,” Mackinnon said. “It may be a large claim, but we are structured to deal with large claims.”

DBRS Morningstar analysts said that total insured losses “will remain manageable given the relatively short period of time that the canal was blocked.”

However, Lloyd’s of London said last week that the blockage was likely to result in a “large loss” of at least $100 million for the commercial insurance and reinsurance market.

Yumi Shinohara, deputy manager of the fleet management department of Shoei Kisen, the Japanese company that owns the Ever Given, told Reuters that the company had not yet received any claims for compensation.



French People Need to Work More to Boost Growth, Minister Says

French Minister for the Economy, Finance and Industry Antoine Armand arrives to attend a governmental seminar at the Hotel Matignon in Paris, on November 4, 2024. (AFP)
French Minister for the Economy, Finance and Industry Antoine Armand arrives to attend a governmental seminar at the Hotel Matignon in Paris, on November 4, 2024. (AFP)
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French People Need to Work More to Boost Growth, Minister Says

French Minister for the Economy, Finance and Industry Antoine Armand arrives to attend a governmental seminar at the Hotel Matignon in Paris, on November 4, 2024. (AFP)
French Minister for the Economy, Finance and Industry Antoine Armand arrives to attend a governmental seminar at the Hotel Matignon in Paris, on November 4, 2024. (AFP)

People in France must work more, Finance Minister Antoine Armand said on Monday, adding that the fact that French people worked less than their counterparts in Europe was harming the economy due to lower tax contributions and social security payments.

The government is examining reforms to speed up its sluggish economic growth, although changes to work practices are often opposed by trade unions.

"On average, a French person works clearly less than his neighbors, over the course of a year," Armand told C News TV.

"The consequence of this is fewer social security payments, less money to finance our social models, fewer tax receipts and ultimately fewer jobs and less economic growth."

France, the euro zone's second biggest economy, wants to cut its public deficit to a targeted 5% of GDP by 2025.

The country's 35-hour work week, introduced in 2000, has typically been fiercely defended by trade unions, while reforms to France's pension system have also faced widespread protests.

"Let's all work a bit more, collectively speaking, starting off by making sure that everyone respects the working hours that they have been given, in all sectors," Armand said.