Claims from the Costa Concordia disaster are set to break through the $2bn (£1.2bn) barrier next year because of difficulties experts have faced salvaging the 114,500-ton liner, insurance experts warned today.
The ship capsized off the Italian island of Giglio while carrying 4,229 passengers in January last year, killing 32. Engineers have started removing the wreck, although it is anticipated to take several more months.
Insurers, including many in the Lloyd’s of London market, have so far paid out more than $1bn, although these costs are set to rise considerably. As well as insuring the ship’s hull, they are also on the hook for liability claims.
Carsten Scheffel, chief executive of Allianz Global Corporate & Specialty, said: “Due to the vessel grounding in an environmentally sensitive area the complexity of the wreck removal has added significantly to the costs. At the moment, the overall cost of the incident is in the order of $1.6bn, which may not be the final amount.
“This will be one of the biggest single marine insurance losses in history.
“Vessels are getting even larger, so insurers are having to consider potentially even higher costs should the largest container vessels or bulkers become total losses in areas where wreck removal would be required.”
David Croome-Johnson, underwriter at Aegis, said: “The increasing cost of removal of large wrecks, such as the Costa Concordia, is fuelled by environmental pressures being applied to politicians and local agencies and the ever-increasing size and scale of vessels and wrecks being removed.
“There has also been a lack of investment in the salvage industry, and fears abound that for the largest tankers and container vessels already at sea, the available equipment to remove them, if they were to sink, does not yet exist.”
In recent years marine insurers have been unable to raise rates because of over-capacity in the market.
Michael Kingston, partner at the law firm DWF Fishburns, says that insurers cannot keep exposing themselves to such large levels of liability. “If insurers cannot insure, trade cannot take place. The vast proportion of what we eat and buy, our cars and building materials, our tea and coffee, arrives on these enormous ships.
“In circumstances where salvage equipment is not in place for the ships being built because it is too costly for any one salvage company to have in place ‘just in case’, something has to give.
“Industry and government must work together and introduce a ‘pooling’ system where industry and society contribute to a fund to keep equipment on standby.
“The consequences of an enormous ship sinking with 18,500 containers in the English Channel would be immense.”