Following the blockage of the Suez Canal – one of the world’s busiest shipping routes – by the MS Ever Given ship container, the Global Head of Marine Risk Consulting, at Allianz Global Corporate & Specialty Rahul Khanna, shared some vital lessons.
The blockage of the Suez Canal had caused players in the shipping business to worry about the impediment to exports and imports.
Lloyd’s list had estimated that the blockage affected the $10 billion of daily marine traffic.
Years prior, insurers had raised concerns over the increasing sizes of vessels that present a higher accumulation of risk when things go wrong.
Those concerns materialised last week when the canal was blocked for days, although, the ship was later refloated, however, the effect of its brief obstruction of shipping traffic will reverberate in the logistics and supply chains for weeks.
Cause of the Suez Canal Blockage By the MS Ever Given
The matter is currently under investigation. Although, the closest to understanding the matter was the theory that the ship was caught in strong winds and sandstorms, leading to low visibility, which made it hard to steer along the canal.
Ships the size of the MS Ever Given, and their stacks of containers are usually affected by strong winds with an extensive ‘windage area’.
The grander the vessel is, the smaller the margin of error.
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Larger Ships and their Risks
Owners of these ships have the advantage of economies of scale but pay more when there is an accident including fires, groundings, and collisions.
The higher the stacks of containers on the ship, the more vulnerable it is to strong winds, a frequent factor in most incidents.
Insurance companies process claims running into hundreds of millions of dollars when a fire breaks out on a large container ship.
Salvage and other general costs go up depending on the size of the container ship, and this costs are mostly borne by the owners, which increases liability.
Rahul Khanna of Allianz Global added that insurance companies are ever ready to support the shipping business so long as they put into consideration the risks that come with owning larger ships.
The thought of having a ship for economies of scale should not be the only thing that matters, Khanna says, but ways to minimise the risks of bigger ships in ports should also be taken into account.
Restrictions of larger ships travelling along narrow canals could also be restricted, Khanna suggests, especially during certain weather conditions.
