Cargo ship sinking off Kerala coast: Experts explain insurance coverage

Kochi: Experts say that the cargo, ship and personnel on the ship are covered under separate insurances with firms mostly based abroad. Protection and Indemnity (P and I) insurance covers financial losses arising from third-party claims, including liability that may arise due to the hazards caused by the sinking.A source with the Company of Master Mariners of India, Kochi Chapter, said there were primarily two kinds of insurances for ships like MSC ELSA 3, which are involved in international trade."There would be a hull and machinery (H&M) insurance to protect the physical structure and machinery of the vessel, including the hull, engine and other equipment. There are international insurance providers who can bear such huge liability. Since the ship got submerged, the owners would get the insurance amount from them," said the source.The source said the P and I insurance covers other aspects, like human life and the cost for medical evacuation. "Liability costs and cleanup costs, etc, will be there if the shipwreck leads to an oil spill and the damages caused by it. Other expenses apart from those covered by the H&M insurance get covered with it to an extent," said the source.He added that each cargo would have individual insurances. "All cargo owners will take insurance before loading it. There would be some deductions like any other insurance, but they wouldn't face a bulk loss. At the same time, the contents of these containers, let's say harmful chemicals, if they reach the shores leading to beaches getting contaminated and people face health issues by encountering it, then the P&I insurance would have to cover it," said the expert.He added that P&I covers of such ships are usually associated with the International Groups (IG clubs 12), which have a combined asset base to cover liability of over more than a billion dollars.Former acting-chairman of JN Port Mumbai and ex-chairman of Mormugao Port Trust, Goa, Jose Paul, said the shipping company may try to salvage the ship. "Now that the ship has submerged, the next alternative is to salvage the vessel. Since the ship has sunk 38nm away from the shore, it is unlikely that it would cause an impediment for safe navigation to Kochi port and back. Ships would have already received a cautionary advisory from the director general of shipping to avoid navigation through the coordinates where the ship has sunk," said Paul.He added it is the DG Shipping which is likely to enquire into the incident since it happened 38nm off the coast and the Mercantile Marine Department (MMD) in Kochi is likely to be asked to file a report on the issue at the earliest.