In conjunction with the 20th anniversary of Middle East Insurance Review, we bring to you, retrospective stories, highlighting each month a momentous event during the past two decades which has shaped the MENA risk landscape. In our third retrospective piece in this year-long series, we look at the six-day blockage of the Suez Canal in March 2021 that disrupted global supply lines.
A 400-m-long mega container ship, the Ever Given, on its way from Asia to Rotterdam, blocked the Suez Canal for six days from 23–29 March 2021. The Japanese-owned 20,000-teu vessel veered off-course in high winds, ran aground and wedged itself across the southern, single-lane stretch of the waterway while carrying roughly 18,300 to 20,000 containers. As many as 400 ships that were following Ever Given, were blocked. Ever Given was only refloated on 29 March 2021.
After being refloated, the ship was held by the Suez Canal Authority (SCA) under a court order while the authority sought compensation from the ship’s Japanese owner and its insurers. The ship eventually left the Suez Canal on 7 July 2021 after 106 days, following a formal compensation settlement reached by the owners and insurers of the Ever Given with the SCA.
Suez Canal
The 193-km-long Suez Canal connecting the Red Sea and the Mediterranean Sea facilitates around 12% to 15% of worldwide trade and 30% of global container traffic—with more than $1tn in goods transiting annually. This also includes around 9% of global sea-borne oil flows. According to data accessed in 2022, an average of 52 ships passed through the Suez Canal every day, carrying hundreds of thousands of containers and millions of tonnes of cargo.
Aftermath of blockage
According to various reports, the SCA initially demanded $916m in compensation to cover salvage efforts, reputational damage and lost revenue before publicly lowering the request to $550m. The Ever Given’s owners and insurers had disputed its detention and the compensation claim.
After protracted negotiations, an undisclosed settlement between the parties was reached and the SCA announced that the ship would be released. The agreement stipulated that neither party would make further claims. The settlement comprised a lump sum.
In the wake of the Ever Given’s grounding, the SCA accelerated a plan to widen and deepen the southernmost section of the canal, and to extend a second lane further north that was built in a 2015 expansion. Rules for ships going through the Canal in difficult weather conditions, however, did not change.
The grounding of the ship in the Suez Canal highlighted the fragility of global supply chains. Incidents such as these delay cargo from reaching its destinations as alternative routes are explored, thus adding to the delivery period and also increasing the costs involved.
According to an estimate, the daily loss of Canal revenue due to the blockage was to the tune of $14m to $15m. The costs to global trade were estimated to be about $400m per hour based on the approximate value of goods moved through the Suez every day, according to shipping news company Lloyd’s List. The Canal’s westbound traffic was estimated at roughly $5.1bn a day, and eastbound traffic at around $4.5bn a day.
Insurance impact
The impact on the insurance industry from the Suez Canal blockage include:
Surge in “General Average” claims
On 1 April 2021, Ever Given’s owner Shoei Kisen Kaisha declared General Average, under which all stakeholders (ship owner and cargo owners) share the losses resulting from a voluntary sacrifice to save the ship.
Re-evaluation of “mega ship” risks
The Suez Canal incident showed that “Ultra Large Container Vessels” (ULCVs) pose a systemic risk. The industry realised that very few salvage companies have the equipment to handle a grounded 220,000-DWT ship.
Accumulation risk
Insurers now place a higher risk price on the sheer concentration of value—often billions of dollars—on a single hull.
Hardening of the reinsurance market
Reinsurance rates for marine liability increased significantly in 2022 and 2023—as reinsurers sought to recover payouts related to Ever Given.
Shifts in business interruption & supply chain cover
Prior to 2021, many businesses assumed their supply chains were “just-in-time” and invincible.
- Parametric Insurance: There has been an increased interest in parametric insurance, which pays out based on a specific trigger (like a canal closure for X days) rather than waiting years for a traditional claims adjustment.
- Non-Physical Damage BI: The industry saw a push for “Business Interruption” (BI) policies that don’t require physical damage to the cargo to trigger a payout, though these remain expensive and rare.
Legal and regulatory fine-tuning
The incident also triggered a massive review of General Average rules. There is now a push for more digitised documentation to speed up the claims process. In the event of another blockage, the industry wants to avoid the months-long legal gridlock that kept the Ever Given impounded in the Great Bitter Lake during compensation negotiations with the SCA.
One of the biggest concerns centred around coverage for delayed cargo but this should be minimal as most cargo policies exclude coverage for delayed transit, global investment bank Morgan Stanley said.
The blockage of the Suez Canal by the Ever Given highlights how a single isolated incident can lead to multiple impacts around the globe. Even after the incident has ended, its after-effects linger for quite some time and lead to long-lasting or even permanent consequences.
Lessons
- Risk management
In a blog in February 2025, Charleston-headquartered insurer KSA Insurance said that the Suez Canal disaster points to several risk management lessons for businesses and recommended that they:
- have in place a diversified supply chain in terms of suppliers and transport routes
- adopt real-time tracking and predictive analytics
- evaluate weak points in operations and supply chains
- add clauses to supply contracts to take into account delays or disruptions
- review and update insurance policies
- Insurance policies
The blockage also revealed gaps in existing insurance policies, added KSA Insurance. Potential improvements include:
- Broadening coverage: Policies should address indirect losses, such as reputational damage or long-term client relationships affected by delays. Businesses may also benefit from add-ons like delay-in-startup insurance for large-scale projects.
- Customised solutions: Insurers can offer tailored coverage options for specific industries, such as tech or healthcare, which have unique supply chain risks.
- Faster claims processing: Streamlined claims processes help businesses recover more quickly from disruptions. Simplifying documentation requirements and introducing digital claims platforms can expedite settlements. M