Insurers face payouts for cargo lost in 2 maritime accidents

The two recent ship accidents off the Kerala coast in the last weeks are expected to impact cargo insurance providers. While Indian cargo insurers had some exposure, the vessels involved were container ships carrying goods for multiple owners, which is likely to limit the impact on soft cargo premium rates. However, the vessel owners are expected to face higher costs, with increases anticipated in both hull insurance and protection & indemnity (P&I) premiums. Both vessels were smaller-sized feeder vessels bringing import cargo containers to India.

A clear picture of the value of cargo in both ships is not known. Indian insurers reported a gross premium underwritten of Rs 5,535 crore in FY2025 in the marine insurance segment. Of this, Rs 3,940 crore was for marine cargo insurance.

However, Indian insurers are unlikely to have any exposure in hull insurance — the physical structure of the ships and machinery — of the two ships. There are three areas of insurance applicable to a cargo vessel — cargo insurance for insuring cargo, hull & machinery for insuring the vessel hull and equipment and protection & indemnity (P&I), which covers all possible liabilities that can happen on account of operating a vessel, like pollution caused by an oil spill.

MV Wan Hai 503, which caught fire between Beypore and Azhikkal ports, off the Kerala coast on Monday, was carrying cargo from Colombo to Mumbai. MSC ELSA 3, a Liberian container ship, sank off the Kochi coast on May 25 due to flooding, triggering a major environmental threat. The vessel sank with 640 containers, including 13 with dangerous cargo and 12 with calcium carbide. It was also carrying 84.44 MT of diesel and 367.1 MT of furnace oil.

Marine insurance provides coverage for goods, ships, and other transport means against risks like damage, theft, or loss during transit. The policyholder pays a premium based on the value of the shipment and the associated risks. In the case of a covered incident, the insured files a claim, and the insurer compensates for the loss or damage as per the policy terms. Marine insurance can be customized to include coverage for specific routes, cargo types, or additional risks like piracy. This ensures businesses safeguard their financial interests during domestic or international trade.