Port of Beirut explosion (2020)
Explosion of about 2,750 tons of ammonium nitrate stored since 2014 in the port of Beirut, on August 4, 2020: more than 200 dead and insured losses estimated at a few billion dollars.
Late in the afternoon of August 4, 2020, a fire in a warehouse in the port of Beirut reached about 2,750 tons of ammonium nitrate unloaded from the Rhosus in 2014 and never shipped onward. The explosion killed more than 200 people and leveled the port and part of the nearby districts. Early market estimates put insured losses at around 3 to 4 billion dollars, a rough order of magnitude rather than a firm figure, given how slow settlement was. The loss hit every line at once. Cargo in transit or stored in the port, including part of the country's grain reserves. Hulls of ships alongside, including a cruise ship sunk at the quay. Port facilities and city buildings, as property damage, with their business interruption. Then liability, with no obviously solvent party to pursue. The question that held up settlements was cause. Property and marine policies exclude war and often terrorism; a storage accident is covered. As long as the investigation did not decide between negligence and a deliberate act, insurers could reserve their position, and the Lebanese judicial investigation was suspended several times. In practice it is up to the insurer invoking the exclusion to prove its facts, and many ended up paying. Add underinsurance on top: much of the building stock was uninsured, and Lebanon's currency crisis meant that an indemnity in Lebanese pounds was worth very little against repairs paid in dollars. The case joins Tianjin in 2015 on the accumulation lesson: a port concentrates goods that each cargo underwriter writes shipment by shipment, without seeing the total sitting on the same quay. Not to be confused with a terrorist explosion in the sense of public pools: no national scheme of that kind covered Lebanon.
Textbook case on the burden of proof: a trader holds 5 million dollars of wheat in a port silo, insured under a cargo policy with a storage extension and a war and terrorism exclusion. The insurer reserves its position pending the investigation. Two years later, no finding establishes a deliberate act: the exclusion cannot be proved, the loss falls under fire followed by explosion, and the 5 million is due, less the deductible. The trader has nonetheless carried for two years the cost of its credit lines on a destroyed stock.
Beirut blast, Beirut port explosion, Rhosus cargo, Beirut ammonium nitrate
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