The fatal Yangtze cruise ship that capsized and killed more than 400 people last week will initially cost its insurers about $14.9 million, or 92.5 million yuan -- the kind of financial hit Canadian insurers have structured their system to avoid.
The four-deck cruiser, christened the Eastern Star, was hit by a freak tornado on the Yangtze River on June 1. It marks of one of the country’s worst shipping disasters in nearly 70 years.
For insurance companies covering the ship and cruise line, the tragedy will mean a sizable payout. According to a conference held by the China Insurance Regulatory Commission Thursday, insurance companies underwrote 340 contracts for parties involved in the incident that live up to requirements for claims. That includes shipowners, travel agencies, passengers and crew members.
Canadian insurers would likely be spared that same kind of hit for a Canadian vessel. North American cruise ships typically rely on several syndicates for medium to large-sized vessels such as Eastern Star.
“If there were a similar accident here involving a vessel that resulted in 400 or more fatalities, the legal liability in most cases would be covered by one of 13 international P&I clubs, which are not Canadian or American entities but located offshore, typically in London or Bermuda,” said Ron Eldridge, senior vice president, marine practice, Marsh Canada Limited, in a previous interview with Insurance Business.
As a result, a shipping disaster such as this would likely have no effect on the Canadian marketplace from a legal liability standpoint.
Hull and machinery insurance, on the other hand, may have a marginal influence on the insurance sphere.
“Most ships of any meaningful size would be insured on a subscription basis whereby no one insurer would write more than a certain percent – maybe 15, 20, 25 percent of the value of the ship – so you’d have multiple subscribing insurers,” said Eldridge. “When you consider that, the impact on any one insurer is minimized.”
In fact, it is dubious whether an insurer would even consider writing a cruise or passenger ship carrying more than 200 passengers at a time.
“There’s a reasonable chance that the domestic Canadian marketplace wouldn’t be interested in a vessel that size,” Eldridge said.The same kind of disaster for a Canadian vessel would The ship itself, which was owned by the Chongqing Eastern Shipping Corporation, was insured for about 15.7 million yuan by the People’s Insurance Company of China.
The CIRC also included estimates for 12 million yuan of liability insurance for travel agencies, 61.7 million yuan of personal insurance for 396 passengers and 3.12 million yuan of personal insurance for 18 crew members.
Already, the People’s Insurance Company of China has paid 10 million yuan to Chongqing Eastern Shipping Corp.
Despite the scale of the tragedy and timing - thee news comes one year after the sinking of a ferry in South Korea that killed 304 people on board, including teenagers on a school trip – the incident is not expected to have much impact on the insurance market or the risk profile for cruise ships.
