Sunken Carnival Cruise Ship Creates Waves of Insured Losses

Cruise operator Carnival Corp. says it has insurance coverage for damage and could face losses of up to $95 million after the luxury cruise ship Costa Concordia ran aground off the coast of Italy on Jan. 13.

According to Carnival, it faces a $30 million deductible for damage to the vessel plus a $10 million deductible on its Third-Party Personal Injury Liability policy.

At least 11 people died among the more than 4,200 passengers and crew who were ordered to abandon ship as the vessel began taking on water after its hull was ripped open by rocks near the island of Giglio. 

More than a dozen people remain missing. Among the 60 passengers reported hurt, two are seriously injured.

Carnival self-insures for the loss of use of the ship, it said in a statement.

“A damage-assessment review of the vessel is currently being undertaken to determine how long it will be out of service,” Carnival added. “The vessel is expected to be out of service for the remainder of our current fiscal year if not longer. In addition, the company anticipates other costs to the business that are not possible to determine at this time.”

According to a bulletin released by Guy Carpenter and several news sources, the Costa Concordia is insured for about $513 million, with XL Group leading the insurance coverage on the Aon-brokered program.

XL could not immediately be reached for comment.

Hannover Re says it expects a claim of at least $12.7 million from the incident, reports Guy Carpenter. RSA Insurance and Italy-based Generali Group also provided coverage, say reports.

The Standard Club confirms it is the lead Protection and Indemnity (P&I) insurer for the Costa Concordia. P&I is a specialist class of liability insurance protection for ship owners and charterers.

According to its Web site, Standard Club is a mutual-insurance association, owned by its ship-owner members and controlled by a board of directors drawn from the membership.

The captain of the ship has been detained on suspicion of manslaughter, since there is some question about judgments he made in the ship’s route and whether he properly followed emergency procedures. He denies any wrongdoing.

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