The West of England is set to be hit with significant claims costs from two major casualties this month.
A fire on the 300,000-dwt New Shipping tanker New Diamond (built 2000) off Sri Lanka so far has not resulted in significant pollution. But salvage, firefighting and pollution prevention measures have been running for more than a week and are expected to continue for some time.
Salvors are struggling to extinguish the fire, which has proved difficult to bring under control.
The biggest concern is if the structural safety of the hull is compromised, it could lead to a serious oil pollution incident. The hull has been towed out into the Indian Ocean in an attempt to prevent any coastal pollution.
The Sri Lanka Navy said: “There is no danger of the ship leaking oil into the sea [from the cargo hold] at the moment.”
Smit Salvage has been appointed as the salvor in the case under a Lloyd’s Open Form contract with special compensation protection and indemnity clause.
The salvage operation will run up daily costs, but the final salvage award, covered through P&I insurance, will also take into consideration the value of the tanker’s hull and 270,000-tonne cargo of crude oil.
A similar fire on the 164,100-dwt tanker Sanchi (built 2008) in 2018 ended up costing P&I insurers around $95m. Experts do not expect the New Diamond to be as expensive, if an oil spill can be averted.
However, the expectation is that it will run up P&I claims in excess of $10m, making it a shared claim with other International Group of P&I Clubs members under their pooled claims system.
Caught in typhoon
The hull has not been declared a constructive total loss yet. Insurance experts suggest that, given the ship’s age and the extensive fire damage, it is unlikely hull and machinery insurers will seek to save and rebuild the vessel. The insured value of the hull is unknown but it has a market value of around $21m,according to VesselsValue.
In a separate casualty, involving P&I cover through the West of England, the 8,400-dwt Gulf Livestock 1 (built 2002) was lost off south-western Japan in Typhoon Maysak on 2 September.
The shipowner, Dubai-based Gulf Navigation, said 40 seafarers remain missing: 36 Filipinos, two New Zealanders and two Australians. The search for the missing men has been called off.
The family of the missing Filipinos will be entitled to compensation through terms agreed under the Philippines Overseas Employment Administration. It is understood that under the agreement, compensation levels are set at a maximum of $50,000 per seafarer and $7,000 for each child in his or her family under the age of 21, up to a maximum of four children.
The other main P&I costs will include the search-and-rescue operation.
Gulf Navigation said it did not believe its financial liability extends to the loss of cargo, which was made up mainly of cattle intended for breeding at a Chinese dairy farm.
The owner added: “The vessel and crew are insured by a member of the International Group of P&I Clubs and a reputable hull and machinery insurers. It is believed that Gulf Navigation has no liability towards the loss of the cargo.”
