TOKYO -- The Suez Canal Authority has seized the Ever Given, the ship that blocked the Suez Canal for almost a week, its Japanese ship owner has told Nikkei.
A spokeperson for Shoei Kisen said the 400-meter long container vessel had been impounded because compensation for losses related to its stranding in the canal, one of the world's busiest waterways, are yet to be paid.
Shoei Kisen said the company is still in negotiations with other parties over liabilities, including the canal authority and Taiwan's Evergreen Marine, which operated the vessel. "I cannot comment on the details of the negotiation," the spokesperson said
The Ever Given remains anchored in the Great Bitter Lake -- a wide section of the waterway used as a passing lane for vessels -- while the Suez Canal Agency conducts an investigation. Egyptian authorities have reportedly said the Ever Given will not be released until up to $1 billion in compensation is agreed on.
The issue highlights the problems remaining for Japanese insurers after the shutdown. Reckoning the damages that insurers are responsible for is expected to take years, the owner and industry watchers said.
Mitsui Sumitomo Insurance serves as lead underwriter for the Ever Given, which became lodged while carrying cargo from Asia to Europe. Tokio Marine & Nichido Fire Insurance and Sompo Japan Insurance are co-underwriters of hull coverage for the ship, which is owned by Shoei Kisen, part of Japan's Imabari Shipbuilding Group.
The three insurers scrambled to gather information during the crisis. "Multiple tugboats were hired to dislodge the vessel, and insurance payments will likely total several hundred million yen to several billion yen," one industry insider speculated. One hundred million yen equals about $914,000.
But while such rough estimates can be made, assessing the full extent of damages presents challenges.
In the case of the Wakashio bulk carrier owned by Japan's Nagashiki Shipping, which ran aground off Mauritius last July, causing a massive spill of fuel oil, the damage was unmistakable.
"When a ship breaks in two like the Wakashio did, it is a total loss and it typically doesn't take long for payments to be made," an insurance industry source said. "But this time, the bottom of the hull needs to be inspected before the extent of the damage can be concluded."
The other factor is general average, a concept unique to maritime insurance. If a vessel at risk of capsizing can be saved by throwing some cargo overboard, the gain -- or loss -- from avoiding such common peril is shared by all parties involved, including owners of the cargo. In accordance with this principle, Shoei Kisen intends to share the costs of refloating the Ever Given with cargo owners.
The problem is that the Ever Given is reportedly carrying cargo owned by several thousand companies. Dealing with that many parties requires an independent general average adjuster, which takes time. Shoei Kisen sees the ending "in several years' time."
An industry insider said: "Two decades ago, a vessel that could carry 6,000 to 8,000 TEUs was called a megaship. Today, their capacity has increased to 20,000 TEUs, which was not envisioned in the long history of the law of general average."
The impact of ever-larger ships is felt beyond insurance. When they founder, the salvage and removal costs are magnified. International advocacy groups have also noted that the dangerous and environmentally damaging work of ship-breaking, or recycling, is consigned to emerging markets that lack stringent worker safety protections.
Maritime insurers use reinsurance coverage to limit the impact of a single accident, an industry source said, adding: "Something like this won't adversely impact the balance sheet." But reinsurance premiums have been rising for the past two years.
Liabilities arising from delays may be covered by protection and indemnity insurance. The Ever Given is insured by the one of the world's oldest protection and indemnity insurers, UK P&I Club, and not directly by any of the three Japanese companies providing hull coverage, nor their peer Aioi Nissay Dowa Insurance, another member of the MS&AD Insurance group alongside Mitsui Sumitomo Insurance.