P&O could face bankruptcy, analysts told City A.M. as they warned a drop in the ferry operator’s safety rating is set to see its insurance bills soar.
The company faces a “sky-high insurance bill” after its safety ratings sank to the “riskiest bracket,” in the face of mounting scrutiny from the UK government over its unlawful decision to fire 800 workers via video call.
Speaking to City A.M. Bruce Hepburn, chief executive of London-based insurance buyer Mactavish, said: “This fall from a medium rating to now the lowest one will see P&O face a sky-high insurance bill.”
The insurance exec explained that the vessels detained by the UK coastguard are “virtually uninsurable,” as he said “it’s extremely rare for a vessel to be in port arrest.”
“Combined with increased insurance costs and the redundancy bill, the company may be in danger of bankruptcy,” Hepburn said.
The comments come after the ferry operator said it had been subject to an “unprecedented level of rigour,” following orders from transport secretary Grant Schapps that the UK’s Maritime and Coastguard Agency (MCA) inspect all eight of P&O’s ships.
Shapps told Parliament in late March vessels would be allowed to set sail until crews are “safe and properly trained.”
As of today, two of P&O’s vessels – Spirit of Britain and Pride of Kent – are still under detention while two others have now been cleared to sail. P&O’s four remaining ferries are set to be inspected in the coming weeks.
For reference, the MCA only detained 30 ships in 2019, after carrying out 1,200 inspections across the year.
Hepburn noted that the reputational damage that P&O has suffered could also make the ferry operator’s situation worse.
“Due to the publicity surrounding P&O, the third-party liability risk will also be ramped up which will see an additional surge in costs,” Hepburn said.
Looking ahead, the Dubai owned firm faces significant “uncertainty” as it faces serious financial issues as it struggles to fully restart its operations carrying passengers along its most “profitable” routes, including between Dover and Calais.