On May 25, 2024, the cargo vessel MSC ELSA 3 capsized 14.6 nautical miles off the coast of Kerala. The Liberian-flagged ship, en-route from Vizhinjam to Kochi, carrying 643 containers including 13 with hazardous material, capsized during bad weather. The incident has been officially declared a “State-Specific Disaster” by the Kerala government due to its environmental, social, and economic impact.

While all 24 crew members were safely rescued by the Indian Coast Guard and Navy, dozens of cargo containers (some containing dangerous chemicals) washed ashore in Alappuzha and Kollam districts.

Kerala swiftly banned fishing within a 20-nautical-mile radius and began cleaning efforts along the coastline.

What did the ship carry?

The ship’s cargo included:

• Hazardous chemicals (like calcium carbide)
• Goods – fruits, textiles, glass, rubber, and green tea
• Plastics and microplastics (a threat to marine life)

Some containers were found empty, others partially intact. Environmental damage control became a top priority, with air and sea monitoring launched by the Coast Guard and specialized NDRF (National Disaster Response Force) units.

Who pays for this disaster?

The ship was covered under multiple Protection and Indemnity (P&I) insurance clubs, including Steamship Mutual and the UK P&I Club. These policies typically cover:

• Oil spills and pollution cleanup
• Wreck removal
• Cargo loss or damage
• Third-party liabilities (like harm to local communities)

However, as is often the case with international waters and foreign flags, jurisdictional complexity can delay or dilute the efficacy of claims.

“Flag of Convenience“

The MSC ELSA 3 was a “Flag of Convenience” ship, sailing under the Liberian flag while being owned by a Swiss entity. Liberia has refused to participate in India’s investigation, complicating the legal process. This flag-hopping practice lets shipowners evade stricter inspection and environmental rules.

This reveals a loophole in international maritime laws that leave coastal states like India to bear the brunt of foreign negligence.

Insurance for whom?

While the shipping company and vessel are covered internationally, what about:

• Fishermen who lost income?
• Local tourism hit by environmental damage?
• Communities exposed to toxic substances?

The Kerala government has stepped in with compensation and aid like monthly cash support and free rations, but insurance settlement through P&I coverage may take time and legal effort.

What can be insured in India?

Here’s what various insurance lines could potentially cover in such cases:

• Marine Cargo Insurance: For Indian exporters/importers with cargo on board
• Marine Hull Insurance: Covers Indian vessels (MSC ELSA 3 is foreign-flagged).
• Liability Insurance: If third parties suffered damage.
• Environmental Liability Insurance: Covers damage caused to the environment (such as pollution clean up, third party claims from pollution, legal costs etc.)

This case underlines how under-insured we are for large-scale marine disasters.

Lessons learned:

1. Need for stronger domestic marine insurance penetration
2. Incentivize environmental liability coverage
3. Faster claim infrastructure in disasters
4. International accountability through P&I desks

From regulatory loopholes to insurance blind spots, the disaster has revealed gaps at multiple levels. While P&I insurers will eventually process claims, the local communities affected cannot wait indefinitely.

It’s time India strengthens its maritime regulatory framework and spread marine insurance awareness. Coastal India needs more than cleanups. It needs a safety net.

insurancepe believes in protection that goes beyond paperwork – in insurance that insures against the unthinkable.

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