Bloomberg News

Cruise Wreck May Cost Generali, RSA, Insurers $512 Million

January 25, 2012

(Updates with Carnival comment from 11th paragraph.)

Jan. 16 (Bloomberg) -- Carnival Corp.’s wrecked cruise ship, the Costa Concordia, was insured by companies including Assicurazioni Generali SpA, RSA Insurance Group Plc and XL Group Plc, three people with knowledge of the policies said.

The three companies are among several insurers facing total costs of about 405 million euros ($512 million) from the disaster, said one of the people, who declined to be identified because the terms of the policies are confidential. Hannover Re, the world’s fourth-largest reinsurer, said it will take a “major loss” exceeding 10 million euros from the wreck.

“In terms of physical damage, this will be one of biggest claims around,” said Eamonn Flanagan, an insurance analyst at Shore Capital Group Ltd. in Liverpool, England. “Quite often with these accidents, the real insurance loss comes if people are injured or killed.”

The Costa Concordia, which was carrying 4,229 passengers and crew, ran aground the night of Jan. 13 near the island of Giglio in the Tyrrhenian Sea off the west coast of Italy after hitting a rock. Five people are confirmed dead and 15 remain missing, according to the Region of Tuscany’s governor, Enrico Rossi. The ship’s captain has been arrested and is accused of manslaughter, causing the wreck and abandoning ship, Italian prosecutors said.

The vessel cost 450 million euros to build when commissioned in 2004, according to a press release at the time.

Aon Corp. was Carnival’s insurance broker, Il Sole 24 Ore reported yesterday, without saying where it got the information. Aon spokeswoman Katherine Conway declined to comment on the report.

Loss ‘Widely Spread’

Carnival shares plunged today, sliding 17 percent to 1855 pence as of 8:54 a.m. in London. RSA dropped 0.7 percent to 109.2 pence in London, while Generali dropped 0.8 percent to 11.95 euros in Milan. XL is listed on the New York Stock Exchange, which isn’t yet open.

The loss is likely to be “widely spread” around the global insurance and reinsurance markets, Flanagan said. Insurers may be able to claim back some or all of the cost from Carnival’s liability insurers should the ship’s captain be found guilty of causing the wreck, he said.

“Covering these kinds of risks is part of Generali’s business,” the Italian insurer said in a statement e-mailed to Bloomberg News. “A prudent reassurance policy will limit the net impact of this specific claim to a very marginal level.”

RSA’s net loss from the wreckage will be in the mid single- digit millions of euros, said a person with knowledge of the exposure. XL is the lead underwriter for the ship at Lloyd’s of London, the market that shares claims and premiums between insurers, according to another person with knowledge of the policy.

Officials at XL and London-based RSA declined to comment.

Self-Insured

Carnival said in a statement today that it’s self-insured for the loss of the use of the vessel, which is insured for damage with a deductible of approximately $30 million. Its third-party personal injury liability insurance carries a deductible of approximately $10 million for this incident.

The grounding will cost the company as much as $95 million, or between 11 cents and 12 cents a share in fiscal 2012, it said.

“We are deeply saddened by this tragic event and our hearts go out to everyone affected by the grounding of the Costa Concordia and especially to the families and loved ones of those who lost their lives,” Carnival Chief Executive Officer Micky Arison said in the statement.

--With assistance from Howard Mustoe in London. Editors: Keith Campbell, Francis Harris.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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