Carnival Grounding May Cost Generali, RSA, XL, Insurers Up to $800 Million

Carnival Corp. (CCL)’s capsized cruise ship, the Costa Concordia, may cost insurers as much as $800 million once employers’ liability claims are paid and the vessel is removed, according to analysts at Numis Securities Ltd.

The total insurance loss is likely to be between $600 million and $800 million, Nick Johnson, a London-based insurance analyst at Numis, wrote in a note today. The cruise ship’s hull insurance will pay out about 405 million euros ($512 million), a person with knowledge of the policy said yesterday.

Assicurazioni Generali SpA (G), RSA Insurance Group Plc (RSA) and XL Group Plc (XL) are among insurers facing payouts for the ship, three people with knowledge of the policies said yesterday. Hannover Re, the world’s fourth-largest reinsurer, said it will take a “major loss” exceeding 10 million euros from the accident. The grounding killed at least six passengers when the ship, carrying 4,200 people, hit a reef off the west coast of Italy on Jan. 13.

“Carnival’s size means that it is likely to be one of the most widely underwritten accounts in the marine insurance market,” Johnson wrote. “Most of the London stocks are likely to have some exposure.”

The cost of the disaster to insurers is likely to exceed the $500 million paid out following the Exxon Valdez disaster off the coast of Alaska in 1989, making the Costa Concordia the largest marine loss on record, Joy Ferneyhough, a London-based analyst at Espirito Santo Investment Bank, wrote in a note to clients today.

Liability Cover

Carnival has liability cover of as much as $3 billion with the Standard Club, a mutual insurance association owned by ship owners, and the Steamship Mutual Underwriting Association Ltd., according to spokesmen for the two firms. It’s too early to say what, if any, claim will be, Standard Club spokesman Mark Baylis said. The higher limits of the policy are reinsured, he said.

“Quite often with these accidents, the real insurance loss comes if people are injured or killed,” said Eamonn Flanagan, an insurance analyst at Shore Capital Group Ltd. (SGR) in Liverpool, England.

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

Aon Corp. (AON) 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 yesterday.

Loss ‘Widely Spread’

Carnival shares plunged today, sliding 17 percent to 1869 pence as of 4 p.m. in London. RSA dropped 0.1 percent to 109.9 pence in London, while Generali dropped 0.6 percent to 11.98 euros in Milan. XL is listed on the New York Stock Exchange, which is closed for a holiday today.

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

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

Carnival said 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.

Pier Luigi Foschi, chairman of Carnival’s Italian subsidiary Costa Crociere, said the company is “very well covered” at a press conference in Genoa today.

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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