REFILE-North Sea shipping crash P&I loss predictions lowered as salvage starts

By Michael Jones

March 11 - (The Insurer) - Predicted protection and indemnity (P&I) market losses in relation to the incident that left two ships ablaze off the coast of northeast England are lower than initially thought, two senior marine market sources told The Insurer.

• Reduced pollution risk due to salvageable jet fuel cargo

• Allianz leads around $43 million hull cover for Stena Immaculate

• Solong's hull cover led by Navium Marine, likely total loss

Initial P&I market responses to the March 10 incident looked set to be another sizable claim, but expectations have lessened on greater containment of the Stena Immaculate’s jet fuel cargo and reduced pollution risk.

One marine market source said that a significant proportion of the jet fuel remained on the ship and looked as if it would be salvageable. This has reduced expected cargo losses and contributed to expectations that the pollution element of the claim is unlikely to exceed the P&I club’s retention, two market sources said.

The Stena Immaculate has its P&I cover registered with Steamship Mutual. The P&I club retains the first $10 million in losses from an event.

Reduced pollution risk also comes as owner Ernst Russ confirmed that the Skuld-registered Solong was not carrying sodium cyanide, and because the Stena Immaculate’s leaked jet fuel is considered a reduced risk relative to other fuels.

Reuters reported that Mark Sephton, professor of Organic Geochemistry at Imperial College London, said that the relatively small hydrocarbons of jet fuel could be degraded by bacteria more quickly.

Meanwhile, loss of life costs are expected to be low. Britain’s coastguard said 36 crew members were taken safely ashore, with one person hospitalised. The search for one individual who was declared missing has been called off.

Initial concerns around recovery of wreckage costs have also reduced.

Based on images from the scene of the crash, one source said the Stena Immaculate looked unlikely to sink. British Transport Minister Mike Kane said the Solong is unlikely to remain afloat and two marine market sources said it looked to be drifting into deeper waters, which would make removal of wreckage unlikely in the event it sinks.

The BBC later quoted British Transport Secretary Heidi Alexander as saying she has been informed that both vessels are now expected to stay afloat, including the Solong.

Alexander added that the Solong can be towed away from the shore and "salvage operations can get under way", the BBC reported.

The marine hull market looks set to shoulder a sizable chunk of the loss.

Three senior market sources said the Stena Immaculate's cover is led by Allianz and has an insured value of around $43 million. It is unclear if the vessel will be a total loss.

Two of these sources said that the Solong’s hull cover is led by Navium Marine and has an insured value of $6.5 million to $7.5 million. This looks likely to be a total loss.

Both hull and machinery policies could see greater exposure due to collision liability clauses.

These clauses see the vessel found not to be at fault in a collision subrogate some or all costs from an incident to the insurers of the vessel found liable for causing it. These costs relate to the hull damage, delay or loss of use of the vessel and general average.

There has been no formal apportionment of liability for the incident.

Allianz, Skuld, Steamship Mutual and Navium Marine declined to comment.