AM Best has said there will be financial consequences for the marine insurance market from the explosion of ammonium nitrate that devastated Beirut and its port.
In a note to clients commenting on the disaster, the global credit ratings agency said it expects the marine and property insurers to be hit hardest.
An estimated $3bn to $5bn-worth of damage has been done to the city.
Financial impact
AM Best said: “For the international market, marine and property lines of business are expected to be impacted.”
There were an accumulation of possible exposures for marine cover providers at the Beirut port including cargo, marine hull and marine liability, which covers ports, facilities and related logistics.
The first insurer to declare on possible claims was Hannover Re. It said at its earnings announcement last week that it is prepared for the disaster to be a “major loss,” indicating that the figure is likely to be in excess of €10m ($11.8m).
AM Best said comparisons could been drawn between the Beirut disaster and the 2015 Tianjin explosions, which cost insurers between an estimated $2bn and $3bn.
However, the ratings agency said that most of the insurance costs of the disaster would fall on the local Lebanon insurance market.
London-based marine brokers estimate the costs of the Beirut disaster are unlikely to run to anything like the same levels for marine insurers as the Tianjin explosions.
They point out that the Middle East insurance cover levels tend to be quite low and there is very little excess cover bought in the region.
Cargo claims
Many of the traditional marine lines of cover such as cargo may find claims are met through general property cover.
There were no significant ship losses as a result of the explosion that should concern marine hull insurance providers. Most of the vessels in the region, with the exception of the 11,388-teu CMA CGM Lyra (built 2011) which escaped damage, were small and old.
The biggest loss so far appears to be the 7,500-gt cruiseship Orient Queen (built 1989). At least two crew on the ship were killed and several more were injured.
Other ships in the area at the time of the explosion included the 2,793-dwt livestock carrier Jouri (built 1999), the 6,343-dwt general cargoship Raouf-H (built 1985), the 802-ceu car carrier City of Rome (built 1999) and the 4,110-dwt general cargoship Metro Star (built 1983).
The final bill for marine insurers may depend on how liability is finally allocated, which, in this instance, is likely to be difficult to prove.
If the port authority is found to be negligent for the disaster, marine liability insurers might face a hefty bill.
