Analysts estimate that the collapse of Baltimore’s Francis Scott Key Bridge might cost insurers billions of dollars in claims. Additionally, one estimate puts the total at as much as $4 billion, making the disaster a record shipping insurance loss.
On Tuesday, the destruction of a famous bridge caused by a collision with a container ship flying the flag of Singapore forced one of the busiest ports in the United States to close. Six persons are currently unaccounted for.
Insurers and analysts are already estimating the probable losses suffered by underwriters across many product lines. These include property, cargo, marine, liability, trade credit, and contingent business interruption. This is because there is little indication of when the Port of Baltimore might reopen.
“Depending on the length of the blockage and the nature of the business interruption coverage for the Port of Baltimore, insured losses could total between $2 billion and $4 billion,” said Marcos Alvarez, managing director for global insurance ratings at Morningstar DBRS. According to him, that would exceed the record insured losses from the 2012 luxury cruise liner catastrophe aboard the Costa Concordia.
The insurance ratings group AM Best’s senior director of analytics, Mathilde Jakobsen, added that the claims will probably total “billions of dollars”.
Ship liability insurance, or protection and indemnity insurance, is offered by protection and indemnity companies, or P&I Clubs. It covers injury and damage to the marine environment.
The International Group of P&I Clubs collectively insures about 90% of the world’s oceangoing tonnage. Additionally, member P&I clubs mutually reinsure one another by splitting claims over $10 million. The IG Group opted not to respond.
The group has general excess of loss reinsurance coverage worth up to $3.1 billion, according to AM Best.
SPREADING THE COST
The ship’s insurers received such policies from over 80 different reinsurers, according to Moody’s Ratings analyst Brandan Holmes.
“While the total claim is expected to be high, it is unlikely to be significant for individual reinsurers since it will be spread across so many,” he stated.
The ship, known as the Dali, was registered with the club, according to a statement from insurer Britannia P&I. The statement also stated that the insurance company was closely collaborating with the ship manager and pertinent authorities “to establish the facts and to help ensure that this situation is dealt with quickly and professionally.”
According to Loretta Worters, a representative for the Insurance Information Institute, AXA XL led the first layer of cover for IG’s reinsurance program. Other global reinsurers participated as well. AXA XL did not answer a request for comment right away.
According to Alvarez, the accident would probably drive up marine insurance premiums all around the world.
Worters continued, saying she thought Aon was the bridge’s property policy’s insurance broker. According to Insurance Insider, Chubb was the policy’s principal underwriter. Both Aon and Chubb opted not to respond.
IMPLAN, an economic software analysis business, reports that the preliminary cost estimates for rebuilding the bridge are $600 million. Federal funding is likely to cover the entire amount, according to the report.
IMPLAN research suggests that the state of Maryland would lose a total of $28 million if the port is closed for just one month.
According to Julien Horn, partner in Ports & Terminals and Logistics at insurance broker McGill and Partners, “the economic disruption and pain felt by businesses and individuals in Maryland and the Baltimore economic area will be widespread and likely take years to fully comprehend and compensate those affected.”
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