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How an oil spill culminated in Peru's worst ecological disaster

How an oil spill culminated in Peru's worst ecological disaster

On 15 January 2022, Peru witnessed its worst ecological disaster.

It all began when a colossal volcanic eruption in Tonga, hundreds of times more powerful than the first atomic bomb, created massive waves throughout the Pacific Ocean.

These abnormal waves hit an oil tanker in Callao, Peru while it was unloading crude oil at a refinery owned by the Spanish company Repsol. This caused nearly 12,000 barrels of oil to spill into the sea, affecting over 17 beaches.

As a result, viscous black waves rolled onto beaches and led to the deaths of numerous local fish and seabirds.

More than a month after the incident, authorities are still conducting large-scale cleaning efforts but the harmful effects on marine life and local communities may be permanent.

In light of the gravity of the disaster, investigations have been launched into Repsol’s alleged negligence and Peru has demanded compensation.

Can insurance help the affected parties?

Contrary to popular belief, coverage for pollution damage is not provided by Marine Insurance.

Instead, ship and warehouse operators opt for a highly specialised policy known as Protection and Indemnity (P&I) Insurance!

P&I Insurance covers a carrier's third-party risks that are not insured by traditional policies. These risks include war risks as well as risks of environmental damage such as oil spills and pollution.

This insurance is provided by mutual insurance associations known as P&I clubs that help shipowners and operators pay compensation through national and international funds maintained by them.  

In this case, a P&I policy can help pay restitution for the pollution damage caused to Peru.

The world's first insurance policy for an ecosystem!

Further Reading

While a P&I policy covers pollution damage, any damage to a ship's body and its machinery can be covered through a Marine Hull and Machinery Insurance policy