Disaster liner was insured for €405m
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Monday 16 January 2012
Shareholders and insurers of the London Stock Exchange-listed cruise ship operator Carnival Corporation will today be counting the financial cost of the grounding of its Costa Concordia liner.
Shares of the cruise holiday giant which owns the ship's operator, Costa Crociere, were likely to fall sharply this morning amid concerns about reputational damage and litigation.
Costa Crociere is Europe's biggest operator of cruises, with brands including Cunard and Princess Cruises also under its umbrella.
Analysts warned that the disaster came just as Europeans traditionally book their summer cruises and could put many potential customers off. "This is the time when most of the cruise lines make the bulk of their money," the analyst Sharon Zackfia of William Blair & Co told Bloomberg.
About a third of cruises are booked in the so-called "wave season" between January and March. It is particularly important to the operators because these customers pay full price to ensure they get their first choice, unlike later bookings which tend to be discounted and therefore at a lower profit margin for the companies.
Carnival's shares had a rough ride in 2011, falling from 3147p to as low as 1742p in August. Many UK shareholders were formerly investors in P&O, which was bought by the US giant Carnival in 2002 in a deal led by its charismatic billionaire chief executive Micky Arison.
The ship was insured for €405m (£335m) with around a dozen companies, led by the XL Group, which operates in the Lloyd's of London market. Britain's RSA Insurance and Italy's Generali are also on the hook. RSA's exposure is thought to be for less than €10m. Aon was the insurance broker.
Carnival's cover includes hull and machine insurance as well as protection and indemnity cover for crew and passenger injuries, shipwrecks, damage to third parties and pollution. However, it has in the past, like many large companies, chosen to self-insure part of its cover – effectively taking on the risk itself. Filings last year suggest it did not have cover for the loss of revenues from an incident like the Concordia disaster.
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