Insurers face large claim after Sanchi tanker collision

The stricken oil tanker Sanchi continues to burn in the East China Sea, leaving insurers with a potentially large bill. On Saturday, the Iranian-owned Sanchi collided with cargo vessel CF Crystal 260km off the coast of China near Shanghai. More than 30 of the tanker’s crew are still missing, although the 21 Chinese crew onboard the cargo ship CF Crystal were rescued. The Panama-registered Suezmax tanker was transiting from Iran to South Korea carrying 136,000 tonnes of condensate, a highly flammable and toxic form of light crude, raising concerns that the ship may sink or explode. South Korea’s Ministry of Oceans and Fisheries told Reuters on Wednesday that the fire could burn for weeks or months. There is also concern that the incident could lead to an environmental disaster, in particular if the ship does sink. However, the Chinese government said on Tuesday that there is no “large-scale” spill and that the condensate is burning off. The incident is likely to be among the most expensive shipping casualties in recent years. The Sanchi hull is valued at $32m, while the cargo is estimated at $60m. Norwegian marine insurer Skuld is the lead hull insurer of the Sanchi, which is owned by the National Iranian Tanker Company. The insurer’s Lloyd’s syndicate reportedly has a 15% share of the risk, while 30% is underwritten by Iranian insurers. The balance is with ten other Lloyd’s syndicates. Skuld is also the liability insurer for the cargo vessel CF Crystal, while Steamship Mutual P&I club is said to be the liability insurer for the Sanchi. Hanwha Total Petrochemical Co confirmed that the loss of the Sanchi’s cargo would be covered by insurance. The accident is surprising because the collision was out at sea and not in a busy shipping lane, according to Captain Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate and Specialty (AGCS). Both vessels would have radar and transponders, he noted. Major casualties involving large tankers are infrequent. Tanker safety has improved greatly in recent years, as has overall maritime safety. The tanker sector has seen just 15 total losses during the past decade, compared with almost 1,200 casualties across all vessels, according to AGCS analysis. The maritime industry saw the number of total shipping losses decline 16% during 2016 to 85, down 29% on the ten-year average, according to the insurer. Its numbers show that large shipping losses have declined by 50% in the past decade, driven by improved regulation and the development of a more robust safety culture. The tanker industry has made a conscious effort to improve safety in recent years, enjoying an extended period of benign loss activity. It has been excellent at pursuing self-regulation and maintaining high standards, explained Mr Khanna. He said tanker crews are well trained and the vessels have a good standard of fire prevention systems, compared with other types of shipping. For example, insurers are currently concerned about the fire risk for very large container ships. Collisions at sea are not the main cause of casualties, but when they happen they tend to be costly. According to AGCS analysis, collision was the fourth most common cause of shipping loss for the ten years ending 2016, behind fire, grounding and sinking. However, there have been a number of collisions in recent years, including one last August between an oil tanker and a US naval vessel. In September 2017, the Indonesian-registered tanker Kartika Segara collided with a dredger in the Singapore Straits. Southeast Asia remains a “hotspot” for marine casualties, according to Mr Khanna. More than a quarter of 2016’s maritime losses occurred in the region. Total losses in Southeast Asia were almost double that of the next highest loss region – the east Mediterranean and Black Sea. “In the past six months, there have been a number of collisions in Southeast Asia, and now we have the Sanchi. While the cause of the loss has yet to be determined, the vast majority of collisions and major casualties involve a degree of human error,” said Mr Khanna. Although the cause of the Sanchi collision is not yet known, there will be important lessons to be learnt from the resulting maritime investigations, according to Mr Khanna. Insurers have expressed concern over the increased size of vessels in recent years and the rising cost of salvage, especially for large container ships. Although tankers have not increased in size during recent years, they represent a high exposure for insurers, said Mr Khanna.

Insurers face large claim after Sanchi tanker collision

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