Insured losses from ship collision could total up to $300M: Morningstar

Insured losses arising from a March 10 collision off the eastern coast of England between a cargo ship and a tanker transporting jet fuel for the U.S. military could total up to $300 million, Morningstar DBRS said in a report issued Wednesday.

Both vessels sustained severe damage from the collision and subsequent fire, which resulted in fuel being released into the North Sea. Most members of the ships’ crews escaped unharmed, but a sailor from the MV Solong, a Portuguese-flagged cargo ship, remains missing.

The Solong is insured by Oslo, Norway-based marine mutual insurer Assuranceforeningen Skuld, and the MV Stena Immaculate, a U.S.-flagged tanker, is insured by London-based marine mutual insurer Steamship Insurance Management Services Ltd., according to information on their websites.

A U.S. government investigation launched to rule out sabotage could significantly impact the handling of related insurance claims, Morningstar said. The Stena Immaculate is part of the federal Tanker Security Program, which contracts with commercial vessels to transport fuel for the military.

The cargo ship’s captain was arrested Tuesday on suspicion of gross negligence manslaughter, according to news reports. Marine traffic tracking data indicates that the Stena Immaculate was safely anchored when the Solong struck it.

The collision will trigger multiple insurance policies, including hull and machinery, protection and indemnity liability, and marine cargo, Morningstar said.

Preliminary footage suggests that both ships could be considered a total loss. The combined estimated insured value of the ships, including salvage operations, is between $50 million and $100 million.

Most financial losses will fall on P&I policies due to potential cleanup costs associated with any pollutant spill. P&I liability and salvage losses could exceed the cost of hull and cargo claims arising from the incident, Morningstar said.

The loss will be manageable for the global marine insurance industry but raises concerns about the profitability of the sector, Morningstar said.