Egypt's Red Sea Accident and Insurance Industry Response - May 1996

Egypt's Red Sea Accident and Insurance Industry Response - May 1996
May 1996

In January 1996, the luxury liner Royal Viking Sun (operated by Norwegian Cruise Line) struck a coral reef while sailing near Rasa Muhammad National Park in Egypt's Red Sea. The accident caused serious environmental damage to this internationally renowned diving site. The accident caused damage to an area of approximately 2,000 square meters, destroying most of the coral species endemic to the Red Sea.

Damage Details
Most of the damaged coral reefs are of high biodiversity species such as the rare Acropora and Montipora species, and the surrounding fish and invertebrates were also affected. This has severely damaged the local tourism industry, especially the diving industry, and is feared to have reduced tourism revenues, which are estimated at about $50 million per year.

Insurance Industry Response
Following the accident, approximately 2.5 billion yen (approximately $23 million at the exchange rate at the time) was paid as compensation through a combination of marine and environmental liability insurance. An insurance group led by Lloyd's of London provided compensation to the ship operator, Norwegian Cruise Line, and the Egyptian government also provided partial support for environmental remediation costs.

Egyptian Government Initiatives
The accident prompted the Egyptian government to expand marine protected areas, including the Rasa Muhammad National Park. In addition, with the support of UNEP (United Nations Environment Program), a project to restore the destroyed coral reefs was initiated. Artificial corals and transplantation techniques were used in the rehabilitation, and a recovery rate of about 50% was reported in the first year.

Lessons Learned and Future Prospects
The accident served as a wake-up call for the importance of environmental protection in the marine tourism industry. The insurance industry is moving to strengthen the content of environmental liability policies and is reviewing risk assessments, particularly with respect to coral reefs and marine ecosystems. Also under discussion is the unification of international liability standards based on the law of the sea.

For Egypt, the accident is seen as a turning point in policies aimed at balancing tourism and environmental protection, and as a first step toward the realization of a sustainable tourism model.