30 Insurers Carry a Slice of Costa Concordia’s $510 M Coverage

Carnival Corp. & plc, the parent company of the Costa Concordia, said it carries $510 million in insurance on the ship, which grounded off the coast of Isola del Giglio, Italy, on Jan. 13.

More than 30 insurers are likely to carry a piece of the property loss, said David French, president of Starr Marine.

"If it's a total loss, it would be the biggest I can recall in my 35-year career in the industry," said French. Starr's Lloyd's Syndicate 1919 has 0.5% of the insured hull coverage, while Starr Indemnity carries 0.8%.

The value of the ship was $490 million at year-end 2011, Carnival said in a filing with the U.S. Securities and Exchange Commission. The company said it has a potential deductible of about $30 million, as well as insurance for third-party personal injury liability subject to an additional deductible of about $10 million for this incident. The company said it self-insures for loss of use of the ship.

That does not include liability costs, which could take years to figure out, French said. The ship remains grounded and partially submerged off the Italian coast.

Italian officials said it could take as long as 10 months to remove the ship. Attempts to remove the 500,000 gallons of fuel on the ship were stopped on Jan. 29 due to rough seas.

Carnival said it might increase its self-insurance levels to mitigate future premium increases. Carnival does not carry coverage related to loss of earnings or revenues from ships or other operations, the company said in the SEC filing.

Seventeen people have been killed in the incident, with another 16 still missing, as of Jan. 30. The cause of the accident is currently under investigation by the Italian authorities.

The lead insurers for the ship are XL Group, Assicurazioni Generali and RSA Insurance Group plc. But because most marine policies are written by syndicates of different companies and protection & indemnity clubs, the risk exposure is expected to be relatively fragmented, according to Espirito Santo Investment Bank analyst Joy Ferneyhough (Best's News Service, Jan. 23, 2012).

Hannover Re said it was expecting a $39 million loss from the ship's grounding, noting the loss expenditure is related to marine hull insurance.

"Liability claims are difficult to assess at this point in time," said the reinsurer. "The assumption is that a market loss running into triple-digit millions of euros could result. The total loss for Hannover Re — as a leading marine reinsurer — could therefore be in the mid-double-digit million euro range."

Carnival said it was assessing the damage to the ship to determine whether the ship can be repaired and what the total cost would be. If the ship is repairable, it is expected to be out-of-service for the remainder of fiscal 2012, if not longer, Carnival said.

The company carries several types of insurance. Protection and Indemnity clubs provide coverage for liabilities, costs and expenses for illness and injury to crew, guest injury, pollution and other third-party claims in connection with our cruise activities.

P&I clubs are mutual indemnity associations owned by shipowners. Carnival is a member of the Standard Steamship Owners’ Protection and Indemnity Association (Europe) Ltd. and the Steamship Mutual Underwriting Association (Bermuda) Limited P&I clubs.

The coverage for hull and machinery is provided by international marine insurers.

Insured loss estimates for the disaster run as high as $500 million to $1 billion, an estimate provided by Espirito Santo Investment Bank (Best's News Service, Jan. 18, 2012). That would make the disaster the largest marine loss in history.

Reinsurance broker Guy Carpenter & Co. estimated about $513 million in insured losses.

(By Meg Green, senior associate editor, BestWeek: [email protected])