Concordia Insurance Claims May Reach $1 Billion, Moody’s Says

Costa Concordia
Rescuers work on the Costa Concordia after the cruise ship ran aground off the Isola del Giglio, Italy. Photographer: Andreas Solaro/AFP/Getty Images

The insurance costs related to the sinking of Carnival Corp.’s Costa Concordia off the coast of Italy may reach $1 billion once environmental damage and injuries are added to the count, Moody’s Investors Service said.

The shipwreck “marks the first major insured loss of 2012 and will result in a drag on first-quarter 2012 earnings for affected firms,” Moody’s Senior Credit Officer James Eck wrote in a note published today.

While damage to the ship will cost around $500 million, other items like personal injury and liability and environmental losses may bring up the final bill, the report said. Reinsurers will likely take on most of the burden, Moody’s said.

In a separate report, Jefferies International Ltd. estimated the total cost at 650 million euros ($850 million).

The Costa Concordia, carrying 4,200 passengers and crew for a Mediterranean cruise, struck rocks and ran aground off Italy’s small Giglio Island on Jan. 13. The accident resulted in the sinking of the ship, leaving 15 dead and 24 still missing.

Most of the losses will be incurred by reinsurers, Moody’s said.

Munich Re, the world’s biggest reinsurer, said Jan. 18 its estimated claims would be in the “mid double-digit-million-euro range,” while Hannover Re said today it estimates total losses of about 30 million euros. Specialty insurer Lancashire Holdings will likely face between $20 million and $30 million in claims, according to Jefferies.

“The earnings drag from this loss event will impede capital growth for affected firms and contribute to the perception among investors that the reinsurance sector cannot earn its cost of capital,” Moody’s said.

The Costa Concordia was also insured by companies such as Assicurazioni Generali SpA, RSA Insurance Group Plc and XL Group Plc, according to Jefferies.

Operations to remove the ship’s 500,000 gallons of fuel may start as early as tomorrow, Bart Huizing of Royal Boskalis Westminster NV’s Smit Salvage said today at a press conference. His company will be handling removal of the fuel which may take about 28 working days, he said.

So far there is no evidence of leaking oil, according to Italy’s Civil Protection Agency.

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