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Beirut port explosion

The Port of Beirut has insurance, but its policy could prove vastly inadequate if it is found liable in the explosion investigation

If evidence implicates Beirut’s port authority in the Aug. 4 blast, it will have to compensate the explosion’s victims without being able to count on its insurer. While the Port of Beirut took out civil liability insurance, it can only claim a pittance in compensation

The Port of Beirut has insurance, but its policy could prove vastly inadequate if it is found liable in the explosion investigation

Beirut's port authority could face astronomical demands for financial compensation in the aftermath of the Aug. 4 explosion. (Photo credit: Nabil Ismaïl)

The severe damage caused by the Aug. 4 explosion that ravaged much of the capital could cost the Port of Beirut dearly, should the judiciary implicate it in the disaster.

Civil liability refers to the obligation of a person or entity to repair damage caused to another, whether intentional or not. For instance, if it turns out that the Port of Beirut is guilty of negligence in storing the ammonium nitrate that caused the blast, it will have to meet demands for financial compensation, which will undoubtedly amount to a colossal sum.

On Aug. 5, the Beirut Bar Association decided to pursue civil proceedings in the case entrusted to Investigative Judge Fadi Sawwan, in order to defend the victims’ rights to compensation.

“Based on the funds that were released after [the] Sept. 11 [attacks on the United States] and pending a final court decision, we demand compensation of $1 million in ‘fresh money’ for each family of the 204 deceased victims, and half a million for some 3,000 wounded who were hospitalized, which is about $1.7 billion in total,” says Moussa Khoury, a lawyer.

The bar also demands payments be made for repairs to property, with damage estimated by the World Bank at between $3.5 and $4.2 billion.

Insurance companies could also turn to the port for compensation for the victims, knowing that they have so far received claims for LL1.6 trillion, according to a progress report by the Insurance Control Commission.

In order to insulate themselves from this type of risk, large ports usually rely on civil liability insurance policies for protection against claims by third parties. The Port of Beirut has a similar insurance policy that also covers risks associated with the presence of explosives, but that policy offers minimal coverage.

According to documents published by Lebanon Debate in early November, the Lebanese subsidiary of the Bahraini group Medgulf — one of the port’s several insurers — would pay a maximum of LL600 million, including LL300 million for physical damage caused to third parties, and LL300 million for death or injury. This is a paltry sum of money given the scale of the disaster and the risks associated with the unsafe storage of 2,750 tons of ammonium nitrate in warehouse 12 since 2014.

The port had ‘the means to have very good coverage’

Was this factor taken into account when setting the insurance coverage limit? Through one of its representatives, Medgulf defended itself, saying, “Our client, the administration of the Port of Beirut, did not provide — and we did not ask for — any details on the contents of the warehouses. We only responded to the call for tenders with previously set specifications. The deal was take it or leave it.”

The choice of the policy limits in the insurance specifications is the prerogative of the port administration, under the supervision of the Ministry of Public Works and Transportation.

Bassem al-Kaissi, the interim port director who replaced Hassan Koraytem following the latter’s arrest in relation to the investigation into the explosion, cites financial reasons for the Port of Beirut’s choice of coverage.

“Having better coverage comes at a cost, but insurance premiums must also have a limit,” Kaissi says, without mentioning any specifics about the amounts currently disbursed.

“No sufficient insurance limit would have been acceptable anyway for insurers, who would not have wanted to take such a risk,” says a lawyer specializing in insurance matters, in reference to the scale of the explosion and claims associated with it.

This is a wobbly defense, according to two insurers who did not wish to be named.

“The Beirut port has significant revenues and the means to have very good coverage,” one of them argues.

The other insurer, who had taken part in calls for tenders prior to the storage of ammonium nitrate in the port’s warehouse, explains that at the time, he was surprised at the low insurance limit. “I expressed, in writing, my astonishment at the unusually low insurance coverage.”

In fact, the port’s liability insurance limits appear to have not been reviewed for many years. “The insurance specifications to which we responded in 2016 were the same as those of our predecessor,” says the Medgulf representative.

According to several sources, for such reviews, the port turns to Anthony Naoum, an insurance consultant, whom Le Commerce du Levant was unable to reach for comment. Fadi Romanos, Naoum’s partner in their brokerage firm CAPE, says his partner is not concerned with this matter.

“The consultant should have requested to review the premiums; that was his role,” says another insurer.

The port management did not respond to Le Commerce du Levant’s request to review the specifications of these public calls for tenders.

Expired in 2019, Medgulf’s contract was extended without launching new calls for tenders; therefore, the same specifications remained in place for early 2019 and 2020.

No reassessment of risks

If there are no specific regulations regarding insurance premiums and coverage, the decision on which policy to buy is normally made on the basis of regular risk assessments.

“The administration in charge of operating the port assesses the risks based on its experience, its knowledge of the infrastructure, assets and employees,” explains the aforementioned lawyer.

Specifications are then drawn up based on this, with proportional insurance premiums. “It is best to reassess risks with each renewal of the contract,” the lawyer says.

“Risks must be assessed and revised annually, or on an even more regular basis,” according to a thesis written at the Maritime Law and Transportation Center at Aix-Marseille University in France. “The port authority has three options to deal with such risks: assume them, transfer them to a third party, or insure them,” wrote Tourad Aidara, the author.

At the Beirut port, there was clearly no risk reassessment. The authority did not even bat an eye when the lira began to depreciate in the summer of 2019.

The port’s Medgulf insurance coverage for explosions thus fell from around $400,000 at the official exchange rate to $75,000 at the black-market rate. And yet, the premiums were not reviewed.

“A watchful administration should have tried to find a solution,” says the lawyer specialized in insurance.

Le Commerce du Levant could not obtain information from the port on its other insurance policies, which are hopefully handled with more caution.

Medgulf, which is not the port’s only insurer, is also behind eight other policies, including one covering warehouses and their containers, which were heavily affected by the explosion.


This article was originally published in French in Le Commerce du Levant. Translation by Sahar Ghoussoub.

The severe damage caused by the Aug. 4 explosion that ravaged much of the capital could cost the Port of Beirut dearly, should the judiciary implicate it in the disaster.Civil liability refers to the obligation of a person or entity to repair damage caused to another, whether intentional or not. For instance, if it turns out that the Port of Beirut is guilty of negligence in storing the ammonium...