The parent company of the Costa Concordia announced recently that a Florida company would be handling the salvage of the ship. A different contractor removed the stricken ship's fuel in March, warding off an environmental disaster in the process. And a major insurance company reported that it, too, avoided disaster: The company took a hit from the Costa Concordia, but it still made a profit -- there still may be customer claims and lawsuits, though, especially for the families of the 32 people who died.
According to early reports, the ship carried total coverage of $513 million. When all is said and done, the claims could total as much as $1 billion. That would mean a bad hit to the insurance carriers' bottom lines. And when insurance companies lose money, they start to look for ways to do things differently.
So industry analysts are busy trying to figure out what kind of impact the Concordia disaster will have on both insurers and the cruise industry. After all, a lot changed after 1912, when the Titanic went down.
Generally, the insurance market takes its cues from regulators. Remember, insurance is about risk, and if regulators tighten up the rules for passenger ships, insurers will adjust accordingly. For example, as one risk professional points out, regulators decided about 20 years ago that the ships themselves (the "hulls") were not the only element of a cruise line that deserved attention. The rules expanded to include people factors, like company policies and personnel hiring and training. Shipboard and "shoreside" operations showed up on state and federal agencies' radar.
The culture at the Concordia's parent company, headquartered in Florida, has come under fire since the accident. Critics also say that crew training was wanting; it explains the delay and confusion in getting passengers to lifeboats.
Strangely enough, the same was true 100 years ago, when the Titanic sank. The White Star Line's need for speed meant the sacrifice of passenger safety. Titanic hadn't been taken on a dry run, and there hadn't been a lifeboat drill; the crew was woefully unprepared for the emergency.
We'll continue this in our next post.
Source: PropertyCasualty360.com, "Leveraging Hindsight into Foresight: Lessons from the Titanic," Anya Khalamayzer, Laura Mazzuca Toops, April 11, 2012
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