Claim Considerations Related to the Beirut Port Explosion – Part 2

  • Date12 August, 2020
  • Location EMEA

On 17 October 2019 large numbers of protesters began appearing in Martyrs Square, Nejmeh Square, and Hamra Street, as well as many other areas of Beirut and throughout Lebanon.  The reasons for the protests are wide reaching from a social, political and economic perspective but centre around alleged corruption and financial mismanagement by the government, with the final straw appearing to be the “WhatsApp tax” (charges on internet voice calls “VOIP”) and Value Added Tax (“VAT”) increases proposed in government cabinet state budget discussions for 2020 and beyond.

This sparked a number of shootings, throwing of rocks and other items, and protesters burned tires and trash cans to create roadblocks on some the major roads of Beirut.  Banks remained closed for two weeks with subsequent unofficial capital controls implemented upon reopening to prevent a bank run, such as limited withdrawals. Security forces including the Lebanese Army and Beirut police intervened to avoid an escalation. As a result of the protests, Lebanon entered a period of political crisis, with Prime Minister Saad Hariri tendering his resignation. Hassan Diab was appointed his successor in December 2019.

After a period of relative calm in early 2020, further protests took place on 14 January 2020 with subsequent flare-ups during the course of January and February 2020.  Since then, Lebanon defaulted on its USD 1.2 billion Eurobond repayment in March 2020 just as the world entered COVID-19 lockdown.

Whilst the official currency peg of 1,507.5 Lebanese pounds (“LBP”) per USD dollar (“USD”) remains, the black-market rate hovers around LBP 8,000 per USD and local lenders have been allowing limited dollar withdrawals at LBP 3,900 per USD.  This has had a severe impact on the purchasing power of the Lebanese people; therefore, purchases of luxury and non-essential items had already started to decline during 2019. For example, a monthly salary of LBP 1.5 million would have been worth approximately USD 1,000 this time last year, but now only has the purchasing power of less than USD 200 per month. Inflation on some imported items had already reached triple figures prior to the explosion.  The quantification of BI and other economic losses in the retail space will therefore need to consider this, both in respect of the trend of the business, and currency clauses where applicable. Where property damage and stock are valued at replacement cost, this will also have a significant impact on quantification.

As the Lebanese central bank reserves plummet to subsidise USD denominated wheat, fuel and medicine, the government were already in discussion with the IMF over a USD 10 billion bail-out prior to the explosion, with early estimates that the damage from the blast could range between USD 10 – 15 billion.


Having dealt with fertilizer manufacturing plant losses in the past, I was familiar with the explosive potential of ammonium nitrate, even before this disaster.

The storage of 2,750 tonnes apparently seized from MV Rhosus in 2014, in such close a proximity to the conurbation, now seems to be the authorities’ focus of attention, as investigations into the terrible tragedy continue. However, one thing is for sure, damage caused by this incident, both insured and uninsured, is bound to exacerbate problems in the country’s political and economic landscape over the months and years to come.

Contact MDD to understand how these socioeconomic effects can be factored into measurement of economic losses arising from this disaster.

The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.