February 25, 2025:
Maritime insurance on ships and their cargoes has been around, in one form or another, for as long as ships have transported cargo. The owner of a ship and the owner of its cargo can both pay for an insurance policy. If the ship and its cargo are lost, the owner of the ship and the cargo each receive a payment covering all, or most of their losses. The costs of this insurance varies from a fraction of a percent of the value of ship and cargo to as much as two percent. Higher rates are charged if the vessel is travelling in a war zone. Those in need of maritime insurance can shop around because there are about a hundred companies worldwide offering to insure ships and cargo.
Most of the ships insured are tankers or container ships. A container ship that can carry 24,000 TEU, or twenty-foot equivalent unit containers. Each TEU can hold up to 24 tons of cargo. An empty TEU weighs 2.2 tons. While the 20 foot TEU is the most common size, many other sizes are available.
Container ships carrying 24,000 TEU cost about $200 million new. These ships last for about fifteen years. After a few years at sea they are considered used and their purchase price falls to two or three percent of the original purchase price. It costs about $10 million a year to operate a 24,000 TEU ship.
The cost of maritime insurance varies according to the current value of a ship as well as what types of cargo it carries and where it operates. Short routes in areas known for calm weather matter as does war risk, including piracy.
There are sometimes other complications. For example, in 2021 the Suez Canal Authority or SCA and Maritime Insurance firm Stann Marine agreed on a deal that would free the container ship Ever Given and its 18,000 cargo containers. In March the ship ran aground in the canal and blocked it for six days. Once freed, Ever Given was seized as Egypt demanded $993 million for loss of business and reputation. That demand was later reduced to $550 million. The final settlement was less than half the demands and payable as installments. Details of the settlement were not revealed except that one condition was that Shoei Kisen, a Japanese ship-builder, would give SCA a tugboat with a towing capacity of at least 75 tons.
It is unclear if the insurance company lawyers or the Ever Given owner will continue the litigation against the SCA, but Shoei Kisen did subsequently file lawsuits in Britain against several other parties involved with the Ever Given, including Evergreen Marine Corp, the Taiwanese company that managed the Ever Given operations.
Egypt was correct in claiming the Canal Authority suffered loss of reputation but did not realize that the litigation revealed even more damaging details that further embarrassed the canal management. In 2020 nearly 10,000 ships moved through the canal, paying an average fee of $586,000 each. Fees are based on size and Ever Given was among the largest ships moving through the canal. Ever Given was expected to pay about $470,000 for the transit in which it got stuck. For that kind of money, the Ever Given owners expected safe passage. Operators of large container ships have been unhappy with the high canal fees, which a year earlier were $700,000 for a ship the size of Ever Given. In response to many large container ships going around South Africa in response to the high fees, mainly because for ships that size it was cheaper, the SCA lowered its fees for the largest ships like Ever Given. Now more operators of large ships are considering using the South Africa route unless the SCA makes some changes in the way it operates, and responds to accidents that were, according to other large ship owners, clearly the fault of the SCA.