Major Incident in the North Sea: Insurance Implications Unfold
The recent collision on 10 February 2025 between the MV Solong and MV Stena Immaculate has resulted in severe damages, a fire outbreak, and a fuel spill in the North Sea. According to estimates by Morningstar DBRS, a prominent credit ratings agency, the total insured losses from this maritime disaster could range from $100 million to $300 million. While the majority of the crew members were successfully evacuated, distress remains as one sailor from the Solong is still missing.
Given the strategic importance of the Stena Immaculate within the U.S. government’s Tanker Security Programme, a thorough investigation is underway to eliminate the possibility of sabotage. Such a scenario could further complicate the insurance claim processes. Morningstar DBRS anticipates the activation of multiple insurance policies due to this incident.
Insurance Policies Under Scrutiny
Hull and Machinery (H&M) insurance is expected to address the structural damages to both vessels. Preliminary evaluations suggest these vessels might be declared total losses. The estimated insured value of the ships, inclusive of salvage expenses, is projected between $50 million and $100 million. However, the most significant financial impact is expected on the Protection and Indemnity (P&I) insurance due to the environmental fallout from the fuel spill.
The extent of pollution remediation required will determine the ultimate costs, with these claims potentially exceeding those related to hull damage. P&I insurance, provided by mutual insurance associations known as P&I clubs, offers protection against third-party liabilities, including pollution control and wreck removal. As per Morningstar DBRS, members of the International Group of P&I Clubs share liability above a $10 million threshold, with additional reinsurance for claims exceeding $3 billion. Given the environmental ramifications, it is projected that P&I policies for both vessels will be activated.
Complexity in Cargo Insurance Claims
Beyond hull and liability insurance, cargo insurance will also be a critical component in the claims process. The owners of cargo aboard both the Solong and the Stena Immaculate are expected to submit claims for their losses. However, as highlighted by Morningstar DBRS, potential disputes over liability could delay settlements, particularly if one vessel is deemed responsible for the incident. In such scenarios, cargo insurers might seek to recover their losses from the liability insurers of the at-fault party through subrogation, potentially leading to extended legal proceedings.
Impact on the Marine Insurance Industry
Morningstar DBRS estimates total insured losses from the incident to fall between $100 million and $300 million. While this figure is anticipated to be manageable for the global marine insurance industry, there are growing concerns over the long-term viability of marine underwriting. This incident is part of a series of high-profile claims in 2024, including the collapse of the Baltimore Bridge and disruptions to maritime trade in the Red Sea and Suez Canal due to geopolitical tensions.
Although this event is not expected to materially affect the credit ratings of marine insurers, Morningstar DBRS warns that rising claims costs could prompt changes in underwriting strategies and pricing models in the foreseeable future. As environmental risks, regulatory changes, and geopolitical instability continue to influence the global shipping industry, insurers must adeptly navigate this increasingly complex risk landscape.
