The blockade of the Suez Canal by the ship Ever Given will result in a large bill for reinsurers worldwide. Credit rating agency Fitch thinks the industry will have to pay out hundreds of millions of euros because of the issue, even as rescuers gradually refloat the 400-metre ship.
The Ever Given has been lying across the channel for almost a week now, blocking the passage of hundreds of ships on the important shipping route. According to Fitch, the issue will depress the revenues of global reinsurers, but has not yet had a material impact on their credit profile. However, the rating agency expects prices for marine reinsurance to rise further.
Shipping rates for tankers shipping oil products almost doubled after the ship ran aground. In addition, the Ever Given has disrupted global supply chains with its blockade. For companies already facing Covid-19 restrictions, costly delays are looming.
‘The ultimate losses will depend on the time it takes for the salvage company to fully dislodge the Ever Given. And on the time it takes until normal shipping traffic is resumed,’ Fitch said. The damage for the reinsurers could easily run into hundreds of millions of euros.
The owner and insurers of the Ever Given are also reportedly facing substantial claims, even if the ship is quickly refloated. Much of the losses are likely to be reinsured by a group of reinsurers worldwide, Fitch said. This will put pressure on profits in the first half of the year.
It is certainly not the first setback for reinsurers. They have already been hit by recent natural disasters such as winter storms in the US and floods in Australia. In addition, they are still struggling with the impact of the Covid pandemic.
Also read: Huge container ship blocks Suez Canal
Picture by the Suez Canal Authority.