Who will foot the bill for last week’s Suez Canal blockage?

Investigations led by Egyptian authorities and insurance companies into what caused a massive cargo ship to run aground and block traffic in the Suez Canal for six days began on Wednesday.

The Japanese-owned Ever Given was floated earlier this week and towed to a resting position in the nearby Bitter Lakes. The losses due to the blockage were steep, as about 15 percent of world shipping traffic transits through the Suez Canal.

Now that traffic is beginning to flow through the key shipping lane once again, a host of insurance companies and protection and indemnity clubs will be seeking liquidity to cover costs racked up as a result of last week's blockage, as well as the Ever Green’s owners in Japan, its managers in Taiwan, Egypt’s Suez Canal Authority and the various owners of the cargo that was on the Ever Green and on the ships that got caught in the bottleneck behind it.

The results of investigations being carried out by both the Suez Canal Authority and by insurance companies will be key in determining who is liable and for how much.

Lloyd’s of London is expecting a “large loss”  due to a flurry of insurance claims, which could amount to $100 million or more, according to its chairman.

An investigative team put together by the Suez Canal Authority began questioning the crew on Wednesday, according to a statement from authority advisor Sayed Sheysha, who is heading the team. The investigators are to hear testimonies from the ship’s crew in order to assess the extent to which it complied with the authority’s directions, to review the captain’s orders before, during and after the ship ran aground and to review the ship’s technical condition, the press statement said.

News outlets reported on Wednesday that the crew are being kept on the vessel for the duration of the questioning, suggesting it could last at least three to four days more.

Two sources informed of talks between Egyptian and Indian officials told Mada Masr that the crew consists of 25 Indian nationals, and that Indian officials have not been able to speak with them but have received assurances that they are safe and believe that an impartial investigation will be carried out.

Former Suez Canal Authority board member Wael Kanddour also told Mada Masr that insurance companies and P & I clubs are to conduct their own investigations into what happened last week.

According to Sheysha as reported in other outlets, while the crew has cooperated with the investigation in large part, they have refused to hand over certain data, chiefly the black box which contains information about the entire voyage.

Should the crew decide not to comply, the case would be referred to Egypt’s justice system, said Sheysa, which could lead to a lengthy litigation process.

Kaddour told Mada Masr that insurance companies and P & I clubs which will pay out the compensation are likely to conduct a separate investigation to establish what happened and the extent to which the insurance companies will cover costs.

According to the Associated Press, the Japanese company that owns the Ever Given has a US$3 billion insurance policy from 13 insurance and P & I clubs specialized in shipping.

AP reported that the Clyde Company for International Litigation anticipates the ship owner will be liable to pay the Suez Canal Authority compensation for the rescue efforts, while the authority is also likely to claim compensation for the disruption caused by the blockage and for damages to the canal itself. Owners of the goods being transported on the Ever Given, as well as on other ships that were disrupted, could also put in claims.

Reuters reported that the ship owner is yet to receive any claims.

According to Kaddor, the incident has also uncovered issues in the capacity of the canal authority. Kaddour said the fleet of tugs needs to be developed to be sufficient to manage the size of ships currently crossing the canal, while new rules will need to be put in place to handle the transit of large ships under high-speed winds.

Kaddour told Mada Masr that ship capacity has doubled from 11,000 containers to 24,000 over the past decade and that Egypt’s fleet of tugs has not kept up, hence the use of a Dutch tug with a 285-ton tensile strength during the efforts to float the Ever Given.

Suez Canal Authority head Osama Rabie announced on Tuesday a plan to procure tugs with tensile strengths of 250 to 300 tons through a Chinese company.