Marine insurers are facing a massive accumulation of risk off the coast of the Bahamas as cruiseships valued at more than $17bn are temporarily laid up with hurricane season fast approaching.
According to VesselsValue, there are 52 cruise vessels currently located in the Northern Atlantic hurricane zone around the Bahamas and South Florida.
Although it is not unusual for there to be heavy cruise traffic in the region, many of the ships are in temporary lay-up.
Of the 52 ships, 44 — valued at $17.1bn — are parked in the region and have not moved significantly in the past seven days, indicating they are in temporary lay-up.
Many ships are either in a dockyard, at anchor or drifting, while keeping engines running.
The region has witnessed some of the most devastating and costly storms on record during the hurricane season, which runs from June to November.
Category-five Hurricane Dorian, which wrecked the island of the Bahamas in September 2019, cost insurers in excess of $3.4bn, but analysts are warning that figure could be dwarfed if the laid-up fleet of cruiseships are caught up in another major natural disaster.
The vessels have been stood down after a series of high-profile Covid-19 infections aboard cruiseships, and travel restrictions to prevent the spread of coronavirus, have effectively closed the cruise business.
Accumulated risk
In a recent analysis of the impact of the pandemic on the marine insurance industry, Willis Re said that the accumulation of risk through lay-up presented one of the major challenges to the industry.
“A number of vessels across the globe which are currently not operational, are moored in close proximity to each other, raising broader accumulation concerns. This is of particular concern to passenger and cruise vessels, which are the sectors experiencing the largest drop in demand,” the broker said.
Marine insurers will be keen to avoid a major loss in the Caribbean with the global insurance industry braced to receive between $80bn and $100bn of claims related to the pandemic.
The situation has arisen as the insurance industry is recognising global warming's impact on the frequency and strength of storms in the region.
However, experts point out that cruiseships off the Bahamas are not in cold lay-up — in which they would be deactivated — but in warm lay-up with engines still running, enabling them to sail at relatively short notice in response to weather reports.
One cruise expert explained: “If a storm is to approach the Bahamas, the ships would pull anchor and sail away from the danger side of the hurricane. Then they would more than likely return and continue to shelter.”
The laid-up ships could also easily migrate south of the hurricane zone by sailing to the safer waters off Barbados. There are eight cruiseships currently laid up off the island.
