The oceans and seas, though vital for maritime trade and commerce, can often be very dangerous and unpredictable, with storms and powerful waves causing terrible ship accidents. Navigational errors or miscommunication among the crew also lead to ship collisions, fires, oil spills and other catastrophic events.
This shows that the risks in maritime transportation are immense, and this is where marine insurance steps in, providing a financial safety net against massive losses. In this article, we will discuss the largest maritime insurance payouts.
These payouts encompass not just the value of the ship and its cargo, but also the extensive salvage operations, environmental clean-up costs, business interruption losses and third-party liabilities as well.
1. Deepwater Horizon Oil Spill (2010)
First in the list is the most renowned incident, which was also the most tragic in terms of its effects. The Deepwater Horizon Oil Spill began on April 20, 2010, in the Gulf of Mexico or Gulf of America, after an explosion and sinking of the Deepwater Horizon Oil Rig, releasing about 200 million gallons of oil into the ocean for more than 87 days.
The oil spill led to massive environmental damage, affecting coastal systems, marine life and the local economy, leading to the total costs for BP estimated at $61.6 billion as of 2016. This figure includes the expenses of cleaning the coasts, damage claims, legal settlements and fines.
The biggest single settlement was the $20.8 billion agreement, which was reached in 2016 between BP and the government of the United States and the 5 Gulf Coast States, which was approved by a Federal District Judge.
It included $5.5 billion for Clean Water Act civil penalties, $8.1 billion for natural resource damages and $4.9 billion to the 5 Gulf states for economic damages and other claims.
The Gulf Coast Claims Facility, which managed claims from individuals and businesses, paid an additional $6.2 billion to more than 220,000 claimants.
BP also spent more than $14 billion on cleanup operations by January 2013.
Transocean, the owner of the rig, agreed to pay $1.4 billion in civil and criminal fines. Halliburton settled for $1.1 billion.
Though BP was largely self-insured, Transocean had a $700 million insurance policy, which was a subject of litigation. The total insured losses across the market, encompassing various covers, were in the billions, though not a single “payout” from one insurer.
2. Francis Scott Key Bridge Collapse (2024)
The recent collapse of the famous landmark in Baltimore and a major trade lane is said to be one of the most expensive marine insurance losses. Though final figures are still being calculated due to the ongoing investigations and litigation, current estimates for total insured losses range widely, with several experts suggesting that they could exceed $2 billion to $4 billion and even higher.
The cost to replace the bridge has been estimated at $1.7 billion to $1.9 billion. Chubb Limited, the bridge’s insurer, has approved an initial $350 million payout to the Maryland Transportation Authority as part of its property insurance policy.
The owner of the ship Dali, Grace Ocean Private Ltd., and its manager, Synergy Marine Group, filed a petition to limit their liability to $43.6 million under the Limitation of Liability Act of 1851. This will influence the ultimate net payouts from the vessel’s insurers.
Grace Ocean and Synergy Marine Group have agreed to pay $101.9 million to settle the civil claims of the U.S Government.
Massive claims are also expected for business interruption, supply chain disruptions, wreck removal, and compensation for fatalities and injuries, which are still being assessed.
Wrongful death liabilities were estimated at $350 million to $700 million.
3. Costa Concordia Disaster (2012)
The Costa Concordia, an Italian Cruise Ship, capsized on January 13, 2012, after it hit a rock formation off the coast of Isola del Giglio, Italy. The accident led to 32 fatalities and the conviction of several people, including the captain, for manslaughter and other charges.
Its capsizing resulted in total insurance industry losses close to $2 billion.
The cruise ship was declared a constructive total loss. Its insured value (hull and machinery) was about $570 million.
The salvage operations were complicated and expensive, and it cost $1.2 billion to refloat and tow the gigantic vessel to Genoa for dismantling. This included a major portion of the total payout.
As compensation for the 32 lives lost, injuries and loss of the passengers’ personal belongings, Costa Cruises offered an initial compensation package, giving about $14,000 at the time.
4. Prestige Oil Spill (2002)
This was a major environmental disaster which happened off the coast of Galicia, Spain, in November 2002.
It involved the MV Prestige, an oil tanker which was loaded with 77,000 tonnes of heavy fuel oil and suffered from a failure, leading to a significant oil spill which affected the coastlines of France, Portugal and Spain.
The accident is said to be one of the biggest environmental catastrophes in the history of European navigation.
The Supreme Court of Spain ordered the ship’s insurer, the London P&I Club and the captain of the ship to pay around $1.7 billion at the time of the ruling, in damages to Spain.
About $69 million was given to France, which was also impacted by the incident. The total economic damages stood at over €4.3 billion. However, the payout was capped by international conventions and the P&I club’s limit of liability.
5. Ever Given Suez Canal Grounding (2021)
The 400 m long container ship ran aground in the Suez Canal on March 23, 2021. It is owned by Shoei Kisen Kaisha and operated by Evergreen Line.
It was sailing from Malaysia to the Netherlands when it became stuck diagonally across the canal, which halted ship traffic from both directions.
Though refloated and not a total loss, the incident triggered massive claims because of the disruption it caused. The total claims related to the grounding were around 2 billion dollars.
The Suez Canal Authority initially asked for $916 million in compensation, which included $300 million for ‘loss of reputation’, which was later decreased to $600 million after negotiations.
Claims were also put forth by shippers and businesses impacted by the blockage caused by the vessel. There was a major component of the multi-billion-dollar estimate.
Conclusion
These incidents are a testament to the inherent risks of seafaring and the important role played by the insurance sector in mitigating financial exposure. As ships grow bigger and more technologically advanced, and as global trade becomes more interconnected, the scale of potential losses continues to increase, ensuring that maritime insurance will remain vital for maritime trade and the global economy.
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