Engineers, insurers on edge as Costa Concordia salvage nears

Fri Sep 13, 2013 9:10am EDT
 
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By James Mackenzie

ROME (Reuters) - When salvage teams begin hauling the wrecked Costa Concordia liner upright on the Italian island of Giglio next week, the financial stakes for insurers will be almost as enormous as the awe-inspiring feat of engineering.

According to reinsurer Munich Re, the overall insurance loss from the accident could surpass $1.1 billion. As much as half of that may be swallowed up by the cost of the salvage operation.

"I think now it's the most expensive wreck removal operation in history," said Rahul Khanna, a former tanker and bulk carrier captain and now a senior marine risk consultant with the shipping insurance arm of Allianz.

"We have our fingers crossed on it and we just hope that this is a success because if it is not, I don't even want to think what the financial consequences would be," he said.

The cost of the salvage operation, which a senior official from the ship's owner Costa Cruises this week estimated at 600 million euros ($800 million) "and rising", is already expected to be greater than the value of the vessel itself.

That compared with other complex salvage operations like the MV Rena, a huge container ship which sank in New Zealand in 2011, whose salvage costs are estimated at around $240 million.

The sheer scale of the Costa Concordia, a vast floating hotel which was carrying more than 4,000 passengers and crew when it went down, make the recovery one of the most complex ever attempted.

Lying on its side on a rock shelf just outside the harbor mouth, the 114,500 tonne vessel is the length of three soccer pitches and appears almost as big as the tiny Tuscan port where it was holed and sunk with the loss of 32 lives on January 13 last year.   Continued...

 
An aerial view shows the Costa Concordia as it lies on its side next to Giglio Island taken from an Italian navy helicopter August 26, 2013. REUTERS/Alessandro Bianchi