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Thursday, January 19, 2012

Cruise Costa Concordia - Insurer's nightmare !!

The sinking of  Cruise Costa Concordia is cause of International concern and Insurance industry fears that this is one of the biggest losses underwritten in Marine portfolio as the estimates range from  $600m-$800m.  Of these, a major portion of liability  of course would of the Hull Insurers.   There are some reports that the deductible is a high $30 million and there is  third-party personal injury liability insurance  with  a deductible of approximately $10 million for this incident.

Costa Concordia is a Concordia-class cruise ship owned and operated by Costa Cruises. She was built at Fincantieri's Sestri Ponente yards in Italy. The name Concordia was intended to express the wish for continuing harmony, unity and peace between European nations.  Costa Concordia entered service in July 2006 and was the largest ship to be built in Italy, at 114,500 tons.  The Cruise  had  year-round sailings in the Mediterranean, is the only vessel afloat to have both main pools covered by retractable glass roofs - more a floating resort than a traditional cruise vessel.   Costa Concordia was indeed a huge ship described in its website as a 'real floating temple of fun that will amaze you’. Costa Concordia has 1,500 staterooms; 505 have private balconies and 55 with direct access to Samsara Spa; 58 suites with private balconies and 12 with direct access to spa. Costa Concordia has one of the world's largest wellness centers at sea, the Samsara Spa. 

14th Jan 12 was agog with news of the Cruise ship having developed major electrical fault two hours after leaving port – there were close to 4200 on board including passengers and crew, the vessel was listing and more than 4000 were rescued.    Reports of that date stated that Coastguards were immediately dispatched to the scene near the island of Giglio, off the Tuscan coast, as terrified passengers were ordered to put on life vests and man life boats as the 290 metre luxury floating palace began to list heavily to one side.   It was reported that after efforts that the liner was  listing at an angle of 20 degrees but it was not in danger of sinking. Besides lifeboats, five other ships that were in the area and a helicopter were used in the operation to ensure that all passengers and crew were safely evacuated.

Photo of listed vessel from
Some of the passengers were quoted as saying that they heard a loud noise indicating agrounding but the Captain reportedly announced that there had been an electrical fault but it seemed very strange as the ship almost immediately began to list to one side. Three people were confirmed dead  as there  were scenes of panic  after the vessel hit  a sandbar.  Investigators will now look into every aspect of this accident, but one of the key elements they will examine will be the electrical systems.  Modern ships tend to use electrical generators to drive the engines, so a power cut can leave the captain unable to steer away from danger.  Human error could also be a factor, and there will also be concern at the speed which the ship listed on to its side.  Some are blaming the Captain of the vessel.

The total losses will ultimately depend on the liability claims that are filed on behalf of those who were injured and killed in the crash.  As of Jan. 18, 11 people had been declared dead and 20 more were still missing.   While property claims get settled faster, liability claims could take longer time.    A report has it that the  lead insurers for the ship are XL Group, Assicurazioni Generali and RSA Insurance Group plc. But because most marine policies are written by syndicates of different companies and protection & indemnity clubs, the risk is not retained by any single entity but gets fragmented – ‘spreading the risk’ with a larger group. 

Newspaper reports states that Genoa Carabinieri scuba divers have conclusively proven the hull damage was caused by impact on Le Scole reef at 42°21′20″N 10°55′50″E, which had been earlier widely reported as being the impact point.  Also underwater at that point were found two strips of steel shorn from the ship’s hull, indicating a violent impact. Dutch salvage firm Smit International have been contracted  for salvage and  to remove the vessel's 500,000 gallons  of fuel. Smit said that the procedure would take two to four weeks.[52] Poor weather conditions may cause a spill as the ship is jolted by waves.

It will not simple be – Ship hull value, which Industry feels would end up as a Constructive Total loss (CTL); liability to passengers / crew but removal of wreck which also could cause sizable loss feared to be around  $100 million.

The website of Costa Cruises  states that  “it is contacting all guests on the Cruise at the time of the tragic accident to make sure they have returned home and are well, and to confirm that they will receive a refund for the cruise and all material expenses relating to it.  Costa Crociere also reiterates that it is in contact with its guests and all consumer protection associations to determine indemnity for the hardship endured, with the support of the tour operator association of each country.  Costa Cruises confirms both the constant commitment and care it devotes every day to safety and its dedication to relations with the guests who represent the company’s most important asset, as they have done for more than sixty years.  Costa Cruises would like once again to express its great sadness over the victims and its support for their families.”

Tail piece : 

There are Heroes and Villains.  The Coast Guard Captain  who furiously ordered the skipper of the Costa Concordia to return to his ship and oversee the rescue operations is hailed while the Captain is vilified and branded as a coward for fleeing in the face of adversity.  He reportedly is  now under house arrest, accused of multiple manslaughter, causing a shipwreck and abandoning ship.

Italian investigators are probing the mystery of a young Moldovan woman who was reportedly on the bridge of the Costa Concordia cruise ship when it smashed into rocks off the coast of Giglio island, forcing the evacuation of its 4,200 passengers and crew. She has been identified as a  25-year-old blonde,  who had been  invited onto the bridge as the cruise liner sailed perilously close to Giglio, in what was apparently a ‘salute’ to an old friend of the captain’s and a favour to the ship’s head waiter, whose family were from the island. Italian judicial authorities,  reportedly are investigating the accident and the captain’s conduct, and  want to interview  the lady also as she might be able to shed more light on the occurrence.  Adding to the mystery, she was reportedly not on the official list of passengers and crews.

Here is a 17th Jan 12 -  photo (courtesy showing satellite image of the vessel

With regards – S. Sampathkumar.


  1. Why did the sonar did not detect immediate land under belly. I doubt the Captain was getting BJ from someone in his cabin or doing someone, very normal for captains on such ships to flirt with women on board take them to cabin.

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