In light of the Suez Canal 6-day blockage, Fitch Ratings expects that the disruption to the global shipping trade is likely to cause a large loss event for the reinsurance industry.

While the blockage will hurt global reinsurers’ earnings, it should not materially affect their credit profiles, while prices for marine reinsurance will rise further as a consequence of the container ship ‘Ever Given’ grounding in the canal, the company wrote.

Fitch estimates losses may easily run into hundreds of millions of euros.

Accidents involving large container ships can cause property claims of over $1 billion, but these are mostly related to salvage, ultimately, the losses will depend on how long it will take to fully free the container and normal traffic can resume.

Fortunately, claims related to hull and cargo insurance, including salvage, should remain significantly below that amount, with salvage claims the responsibility of the ship’s owner’s hull insurer.

Unfortunately, claims from the owners of Ever Given’s cargo and the vessels that have been delayed due to the blockage is most likely on the table, due to losses related to perishable goods and supply chain disruptions.

These claims will be sent to the ship owner’s protection and indemnity club.

A large share of those losses will probably be reinsured by a global panel of reinsurers. In isolation, this large loss event should be neutral to their credit profiles, wrote Fitch Ratings.

With over 360 ships on standby due to Ever Given’s accident, it will add pressure to global reinsurers’ 1H21 earnings – earnings that have already been knocked by catastrophe events such as winter storms in the US and flooding in Australia, as well as by additional coronavirus pandemic-related losses.

Global reinsurers have already reported heavy declines in earnings due to paid claims and claims reserves related to the coronavirus pandemic.

“…underlying performance improved due to significant price increases in non-life primary and reinsurance, …and their capital positions remained very strong at end-2020. The sequence of catastrophe events in 2021 will put additional strain on commercial insurance and reinsurance markets, pushing prices even higher in an already hardening market,” wrote the report.