A legal and environmental crisis is unfolding off the southern coast of India, where the government of Kerala is seeking damages amounting to ₹9,531 crore (£900 million) in the wake of a catastrophic maritime incident involving a vessel operated by MSC Mediterranean Shipping Company. The unfolding saga has placed insurers – both marine and environmental liability – under intense scrutiny, as claims mount from across the state’s coastal communities and government departments.
The MSC ELSA 3, a Liberian-flagged container ship, foundered on 25 May during rough seas stirred by the southwest monsoon. The vessel, en route from Vizhinjam to Kochi, was reportedly laden with over 640 containers – some carrying hazardous chemicals such as calcium carbide and tonnes of plastic pellets, known as nurdles.
The Kerala High Court has authorised the provisional arrest of two MSC-linked ships – first MSC Manasa F and now MSC Akiteta II – anchored at Vizhinjam port, as part of an admiralty claim initiated by the state. The arrests aim to secure the colossal reparation sought for what authorities have termed a “State-Specific Disaster,” alleging damage to marine ecosystems, severe economic disruption to the fishing industry, and public health risks.
A three-tier state response apparatus, including scientific and legal arms, has been mobilised to confront the ongoing fallout. Six marine animal carcasses, including dolphins and a whale, have reportedly washed ashore with microplastic contamination suspected.
The insurance arrangements underpinning MSC ELSA 3 are substantial but not unusual. The vessel itself was covered under a Hull & Machinery (H&M) policy, protecting against the loss of the ship. Liability cover – particularly for pollution and third-party harm – falls under the remit of the Steamship Mutual Underwriting Association, a member of the International Group of P&I Clubs.
Meanwhile, cargo owners must pursue their own insurers for losses sustained. Under maritime law, a General Average may also be declared, obliging both shipowner and cargo interests to share certain salvage and recovery costs.
Insurers now face the dual challenge of evaluating liability exposure under P&I cover while navigating claims from individual shippers and affected third parties. The most pressing of these may stem from environmental damage, which includes both visible oil contamination and the far more insidious nurdle spill.
More than 600 tonnes of nurdles have already been recovered from beaches in Kerala and Tamil Nadu – just a fraction of the estimated 1,500+ tonnes believed to have gone overboard. The pellets pose grave risks to marine life and fishing livelihoods, with concerns mounting over seafood contamination and long-term ecosystem disruption.
Disposal protocols for the recovered plastic are still being debated, with involvement from Customs, state pollution control boards, and central maritime authorities.
Efforts to salvage the wreck and recover remaining containers are underway but have been hindered by monsoon seas and legal wrangling. Dutch salvage firm SMIT has been contracted for operations expected to begin in August. In parallel, India’s Directorate General of Shipping (DGS) has demanded forensic verification of shipper declarations, amid speculation of misdeclared hazardous cargo.
Maritime lawyers note that the case could become a pivotal precedent in India’s evolving approach to environmental accountability under the Admiralty Act 2017, potentially reshaping how courts treat vessel arrests and pollution-linked litigation.
For insurers, the incident underscores the growing liabilities tied to environmental risk in marine underwriting. The case has drawn comparisons to the MV Wakashio disaster off Mauritius, though the scale of claims from coastal fishing communities here may be unprecedented in Indian jurisprudence.
As monsoon rains continue to lash the coast and the trawling ban nears its end, the people of Kerala are left staring at contaminated nets, faltering markets, and an uncertain ecological future. For the global insurance industry, the episode serves as a potent reminder that maritime losses are no longer confined to ship and cargo – they are increasingly entangled with the delicate social and environmental threads of the world’s coasts.
The Nordic Association of Marine Insurers (Cefor) has released its 2024 Ocean and Coastal Hull trends, and the message for underwriters and risk managers is clear: modern marine insurance claims are increasingly driven by ageing fleets, machinery failures, and a surge in high-cost fires and collisions. MSC Elsa 3 was built in 1997, making her 28.
The data, drawn from the Nordic Marine Insurance Statistics (NoMIS) database – one of the industry’s most respected actuarial repositories – signals that what was once considered a benign claims environment is now shifting. For the first time in over a decade, 2023 and 2024 have each recorded multiple losses exceeding US$50 million.
Machinery damage has emerged as a standout concern. In 2024, the average machinery claim cost per vessel was 50% higher than the 2015-2021 average, continuing a steep climb observed over the past three years. The root of this trend lies in vessel demographics: many ships were delivered in the years following the 2008 global financial crisis, and are now entering their second decade of service.
These ageing vessels – particularly those between 13 and 17 years old – are significantly more prone to engine failure, steering gear breakdown, and consequential incidents such as groundings or collisions. Cefor notes that machinery claims accounted for 56% of the total claims cost in this age bracket, compared to just 35% for newer ships.
Notably, in 2024, there were 11 machinery-related claims exceeding USD 5 million, up from 7 in 2023 and 9 in 2022. The most common cause was damage to the main engine, followed by auxiliary engine and shaft-related issues. These figures do not account for machinery-induced secondary incidents, such as ship blackouts leading to crashes – like the Dali’s well-publicised collision with Baltimore’s Francis Scott Key Bridge.
While machinery damage is more frequent, fire and collision are the most financially devastating. In 2024, four of the nine largest claims exceeding US$10 million were fires. In 2023, fire was responsible for half of all claims above that threshold – including the two largest losses, both over US$50 million.
Many of these fires originated in container cargo holds, and others in engine rooms – blurring the lines between machinery malfunction and fire-related loss. The underlying risk is amplified by increased ship size, limited fire suppression access in container stacks, and cargo misdeclaration.
Collisions also returned to prominence. The two largest claims over US$30 million in 2024 were both due to vessel collisions, reversing a ten-year period of relative calm in nautical-related losses. Combined with machinery-linked grounding and contact claims, this cluster points to a systemic risk profile increasingly driven by cascading technical failures.
From the fourth quarter of 2023, weather-related claims also began to tick upward. Cefor suggests that routing changes – such as the increase in vessels bypassing the Suez Canal to navigate around the Cape of Good Hope – have exposed ships to rougher conditions and contributed to a higher frequency of heavy weather incidents.
In many of these cases, machinery issues are again a trigger. For instance, a blackout during a storm can render a vessel unable to steer, dramatically compounding potential damage. The line between environmental and technical risk is, once more, blurred.
Cefor’s report also highlights a lesser-known trend tied to the COVID-19 pandemic. Vessels that were idled or laid up in 2020 show a disproportionately high claims frequency both before and after the idle period. Analysts suspect that lower-performing vessels were more likely to be idled, and many have since been scrapped. Those that remained active have continued to perform poorly – reinforcing the view that operational history and fitness are critical indicators of claim risk.
Claim cost inflation persisted into 2024, albeit at a slower pace than in 2022. Yet the rising costs of spare parts, dry dock repairs, salvage operations, and firefighting – especially aboard increasingly complex vessels – continue to pressure hull underwriters.
When machinery malfunctions cascade into fire, collision, or grounding, classification of the root cause becomes murky. Cefor cautions that aggregate machinery-related exposure may be materially higher than traditional claims coding suggests.
In an era where marine losses are increasingly defined by complexity and cumulative causes, insurers are being urged to break down traditional silos in claims analysis. The data from Cefor’s 2024 report suggests that tomorrow’s major losses are already embedded in today’s maintenance logs, routing charts, and cargo manifests.
2. Francis Scott Key Bridge Collapse (2024)
3. Costa Concordia Disaster (2012)
4. Prestige Oil Spill (2002)
5. Felicity Ace Fire and Sinking (2022)
6. MV Wakashio Oil Spill (2020)
