Losses from the Kea Trader container ship, which ran aground in July last year, have deteriorated by an additional $40mn - pushing the cost for marine (re)insurers to $210mn, re-Insurance.com can reveal.
Notification of the increase in losses was given by the International Group (IG) the day before its $3bn reinsurance cover incepted on 20th February for the year ahead, this publication understands.
The Kea Trader, which is owned by Lomar Shipping, was the only protection and indemnity (P&I) club loss to hit the club’s reinsurance programme in the 2017/18 year.
Lomar Shipping is registered with Skuld, which confirmed to re-Insurance.com back in December that it would pick up the liability portion of the loss.
As a member of the IG, Skuld’s retention for the loss stands at $10mn. The P&I club’s pooled layer covers the next $20mn before a $70mn layer reinsured by Hydra - the club’s captive - incepts.
The club’s excess of loss reinsurance programme then kicks in for losses exceeding $100mn.
The International Group buys over $3bn of XoL coverage for 13 of the leading P&I clubs with an excess of $100mn.
The first advice to reinsurers issued by Miller in November and seen by re-Insurance.com, stipulated that IG reinsurers should establish reserves of $70mn for the loss.
The 2017-built containership ran aground on a reef in the South Pacific on 12 July 2017, 50 miles to the southeast of New Caledonia.
There was a total of 756 containers onboard, of which 553 were empty and 203 contained cargo. Of the 340 that were held below deck, only 60 held cargo.
In total, 143 of the containers contained salvable cargo and value.
Following assessments, the Kea Trader was found to be beyond repair due to extensive damage to the ship’s hull, rudder and propeller, incurred both by the initial grounding and subsequent deterioration on the reef.
Attempts to recover cargo and refloat the vessel were made, but as a result of bad weather the grounded vessel developed a crack and split into two halves on 12 November - with 108 of the original 756 units still on board.
Although heavy fuel oil was earlier pumped out of the vessel, authorities reported traces of pollution from residual quantities of hydrocarbons at the site.
However, at the time the first advice was issued Miller did warn reinsurers that the $70mn loss estimate was likely to creep, estimating that the full removal of the was likely to cost reinsurers in the region of $90mn-$110mn.
Last week Lomar Shipping awarded the contract to remove the vessel to salvage and wreck removal company Shanghai Salvage Company for an undisclosed sum following a four-month tender process.