The FINANCIAL — Due to increasing vessel sizes and growing cargo volumes, the cost of removing shipwrecks, such as the stricken Costa Concordia, is spiralling, marine experts warn, according to Lloyd's, the world's specialist insurance market.
Shipwrecks are often a massive media event, frequently combining reports of heroism on the high seas with dramatic scenes of stricken vessels spilling their cargoes. But after the TV crews have moved on, the essential and sometimes dangerous work of wreck removal gets underway. And, as a new report from Lloyd’s reveals, the cost of this complex job is rising fast – with insurers and reinsurers, and ultimately shipowners, having to foot the bill.
The wreck of the Costa Concordia cruise ship, which spectacularly ran aground off the coast of Italy last year, has highlighted the issue of rising wreck removal costs. It has already cost significant sums of money and the wreck has not even been moved yet.
The bill for removing the wreck of the MV Rena, a container ship which sank off New Zealand in 2011, currently stands at $240 million. The removal of the MSC Napoli, which attracted thousands of scavengers to the UK’s south coast in 2007, took two and a half years to complete and cost $135 million, according to Lloyd’s.
Vessels are usually insured by mutual insurers called P&I Clubs, which pool their larger risks and buy reinsurance in the open market (including Lloyd’s) for risks exceeding $70 million. To show how both P&I Clubs and their reinsurers have been impacted, the total cost of the top 20 most expensive wreck removals in the past decade is $2.1bn and rising.
In the cruise sector there are 51 vessels currently in service of greater than 100,000 gross tonnes, a further seven under construction and more on order. By comparison, in 2007, there were only 40 such vessels in service or under construction. Container vessels have grown in size too. In the 1990s a large container vessel carried some 5000 “twenty foot equivalent units” (TEU). By the mid-2000s containerships with a capacity of 12,000TEU were coming into service. The largest containership in service today has a capacity of 16,000 units, according to Lloyd’s.
Global media coverage and lobbying from environmental groups has added to the pressure on international and local authorities, intensifying their oversight of wreck removal and adding to costs. Environmental considerations, related to the wreck’s cargo or own bunker fuel, have a significant impact on costs, especially the removal of bunker fuel, the report explains.
Technology has pushed the boundaries of what is feasible for wreck removal specialists. Fuel and cargo, for example, can be recovered from a wreck lying in deep water and, if it is achievable, the authorities increasingly demand for it to be done.
The report notes that in three particularly expensive cases – the Napoli, Rena and the Costa Concordia – the influence of the authorities was the most significant factor in increasing the cost of the operation and could be the key factor determining the total cost of removals, according to Lloyd’s.
