Cruise ship insurance
Hull, machinery and liability insurance for ships carrying more than 3,000 passengers: new-build value above one billion dollars, passenger and crew P&I, illness on board, loss of income.
On February 3, 2020, the Diamond Princess, a ship of Princess Cruises with 3,711 people aboard, arrives in Yokohama after a passenger who disembarked in Hong Kong tested positive for coronavirus. She stays in quarantine for nearly a month: 712 people are infected, 14 die. The loss is neither physical damage nor an average, and it falls into a cover that had not been designed for it. A cruise ship brings together three risks that insurance treats separately. Hull and machinery cover an asset of more than a billion dollars for the biggest ships, with concentrations of value that have no equivalent: a fire or grounding, like the Costa Concordia's in January 2012, can be a total loss. Liability to passengers and crew falls to the P&I club, with the limits of the Athens Convention for passengers and exposure to lawsuits from countries where amounts are high, notably the United States. The third is illness on board: norovirus, outbreaks, which P&I policies handle for medical and repatriation costs within a limit, but not for lost revenue. Loss of income, when sailings are canceled, falls to loss of hire insurance or tailored cover, hard to obtain after 2020. Clubs have added communicable disease exclusions to their rules, and cruise lines keep high deductibles.
Textbook case. Ship of 5,500 passengers, insured value of USD 1.2bn in hull and machinery, deductible of USD 5M. Engine room fire, ship idle for three months: repair of USD 85M, reimbursed after deductible. The 5,500 passengers, evacuated, claim their canceled cruise and their travel expenses: USD 40M, taken by the P&I club within the passenger policy limits. Lost revenue, USD 70M, is not covered, for lack of a loss of income policy on this ship.
cruise ship insurance, cruise line insurance, cruise P&I, passenger vessel hull insurance, onboard outbreak cover, cruise liability
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