Reinsurers to bear the bulk of insured cost of Baltimore bridge collapse, says AM Best

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The collapse of the Francis Scott Key Bridge near the Port of Baltimore, Maryland yesterday is expected to drive billions of dollars in insured losses, with reinsurers set to bear the bulk of the claim amid concerns it could become the largest ever marine loss.

baltimore-bridge

Image source: EPA

Around 1:30am local time, container ship “Dali” reportedly lost power before passing under the bridge, which caused the vessel to sail uncontrolled into a pillar of the bridge, resulting in a major collapse.

Videos online show the extent of the damage with a large section of the bridge, which was 1.6 miles (2.6km) long, collapsed into the river, leading Maryland Governor Wes Moore to declare a state of emergency and close the Port of Baltimore to ships.

It’s been reported that the value of the bridge itself could be about $1.2 billion, while there’s also been extensive damage to the container ship, which was deporting for Colombo, Sri Lanka.

Reportedly, Aon brokered the bridge policy for its construction, value, and replacement, but reports suggest that any claims against this are expected to result in subrogation to the shipowner’s insurance coverage.

The Dali is owned by Grace Ocean Pte. Ltd. and it’s been confirmed by marine protection and indemnity insurer the Britannia P&I Club that it provided part of the coverage for the ship.

While severity is still to be determined, it’s clear that the accident will impact several lines of business, such as property, cargo, liability, trade credit, and contingent business interruption, with marine insurers and reinsurers undoubtedly involved in the loss.

According to ratings agency AM Best, reinsurance companies “will bear the bulk of the insured cost” of the collapsed bridge, while S&P warns that the event will have “major implications for reinsurers and the wider marine insurance market”.

Liability cover for many vessels is provided by P&I Clubs – protection and indemnity insurers, a sector dominated by the members of the International Group of P&I Clubs, which together insure some 90% of the world’s ocean-going tonnage.

As explained by AM Best, as part of the Group’s pooling arrangements, members mutually reinsure each other by sharing claims above USD 10 million, while the Group also purchases general excess of loss reinsurance cover up to USD 3.1 billion in the open market.

“While the total cost of the bridge collapse and associated claims will not be clear for some time, it is likely to run into the billions of dollars – well above the USD 100 million attachment point for the GXL contract,” says AM Best.

“The claim will likely involve several insurers, reinsurers, subrogation, and legal issues and will serve to add to the increasing challenges in reinsurance availability,” continues the rating agency.

Similarly, Brandan Holmes, an analyst at Moody’s Ratings, has said that the collapse of the bridge will “likely lead to substantial insurance claims against the vessel’s insurers related to the ship and its cargo, but more significantly the destruction of the bridge and disruptions to the port.”

According to Holmes, around 80 different re/insurers provide some $3 billion in cover to the ship’s insurers, Britannia P&I Club and the International Group of P&I Clubs.

However, while the total claim is expected to be very high, Holmes emphasises that it’s unlikely to be a significant event for individual carriers as it will be spread across so many players.

What’s clear is that this accident has the potential to become the largest insured maritime loss ever, exceeding the $1.5 billion+ cost of the Costa Concordia event, which capsized in 2012.

The post Reinsurers to bear the bulk of insured cost of Baltimore bridge collapse, says AM Best appeared first on ReinsuranceNe.ws.

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