Tuesday, March 26, 2024

Francis Scott Key Bridge Collapse: Insurance and Reinsurance

As the search for the six missing workers who were doing repairs on the bridge deck continues, the financial ramifications are beginning to come into focus.

First up, from S&P Global Market Intelligence, March 26:

Reinsurers, marine market to bear brunt of Baltimore bridge collapse 

The collapse of a bridge near the Port of Baltimore will have major implications for reinsurers and the wider marine insurance market as one of the busiest ports in the mid-Atlantic grinds to a halt.

The Francis Scott Key Bridge fell into the water early in the morning of March 26 after being struck by a cargo ship departing the port for Colombo, Sri Lanka. Maryland Gov. Wes Moore declared a state of emergency, and emergency personnel undertook rescue efforts.

Crew onboard the Singapore-registered container ship Dali notified the Maryland Department of Transportation just before the accident that they had lost control of the vessel and that a collision with the bridge was possible, according to media reports.

While the accident will generate a complex web of claims and liability that may take years to untangle, the financial fallout is expected to fall heavily on the reinsurance industry.

"No doubt both marine insurers and reinsurers will be involved with this loss," said Loretta Worters, a spokesperson for the Insurance Information Institute.

Liability lessons

The Dali is owned by Grace Ocean Pte. Ltd., managed by Synergy Marine Pte. Ltd. and covered by The Britannia Steam Ship Insurance Association Ltd., or Britannia P&I Club. Protection and indemnity (P&I) clubs are mutual insurance organizations that insure and pool liability for the global shipping industry.

All crew members and the two pilots operating the Dali have been accounted for, according to a statement from a Britannia P&I Club spokesperson. The statement noted that the "exact cause of the incident is yet to be determined."

The value of the bridge itself could be about $1.2 billion; it is not yet known if the insured limit on the property placement will fully cover replacement, Worters said. Insurance Insider reported that Chubb Ltd. is the lead insurer of the bridge itself, but any claims are likely to be subrogated to the shipowner's insurance.

The incident will impact the International Group of P&I Associations the hardest, according to Worters, who said the group has significant reinsurance coverage, led by AXA XL. Worters also said it was her understanding that Aon PLC covers the bridges and tunnels property placement for the State of Maryland....


And from Insurance Business Magazine, March 26:

Major (re)insurers and P&I club on hook for Baltimore bridge disaster
Collapse expected to drive "one of the largest claims" ever for marine market  

A search-and rescue operation is underway in Baltimore after the Francis Scott Key Bridge collapsed, sending at least seven cars into the Patapsco River. The event is likely to lead to legal wrangling and major claims activity, with reinsurers set to take a heavy hit.

The collapse is expected to drive “one of the largest claims ever to hit the marine (re)insurance market,” John Miklus, American Institute of Marine Underwriters (AIMU) told IBA.

“You've got various components to the loss,” Miklus said. “A big one is going to be rebuilding the bridge and all the loss of revenue and loss of tolls while that's taking place.”

It’s expected to be a huge and costly salvage operation, Miklus said. Liability claims are also anticipated from loss of life. Six people remain unaccounted for, with rescue operations underway. There are also supply chain implications.

Could Baltimore bridge disaster top Costa Concordia cost?

Commentators have likened the scale of the incident to the sinking of the Costa Concordia. The cruise ship ran aground off the coast of Italy in 2012. The event, in which 32 people died, drove a marine insurance loss of $1.5 billion.

“I wouldn’t be surprised if this were similar,” Miklus said of the Baltimore bridge incident loss figure.

The Costa Concordia disaster (2012) 
  • Location: Off the coast of Isola del Giglio, Italy 
  • Cost: The salvage operation alone cost over $2 billion, making it one of the most expensive shipwrecks in history. Additional costs included compensation to passengers and crew, legal liabilities, and loss of the ship. 
  • The insured loss cost of the disaster exceeded $1 billion, making it to the most expensive marine loss of all time.
“We are horrified by what has happened in Baltimore”

The bridge collapsed Tuesday at about 1:30 a.m. local time after a container ship crashed into a support column, according to a report by The Baltimore Sun. Local authorities are calling the collapse a “mass-casualty event.”

Denmark-headquartered Maersk, the world’s second-largest shipping company, confirmed that it had chartered the vessel that hit the bridge, the container ship Dali. The Singapore-flagged vessel was operated by charter company Synergy Marine Group, according to a Financial Times report. Synergy said the owners of the Dali, Grace Ocean Pty Ltd, were cooperating with federal and state authorities.

“We are horrified by what has happened in Baltimore, and our thoughts are with all of those affected,” Maersk said in a statement. The shipping giant said no Maersk crew or personnel were onboard the Dali at the time of the incident.

The Dali had liability insurance through Britannia, part of the International Group of P&I Clubs. Together, the group has upwards of $3 billion of reinsurance cover, sources said. AXA XL is said to lead the first layer of cover for IGP&I’s reinsurance program, with other global reinsurers also in the frame....

....Chubb is the lead market for property placement on the Francis Scott Key Bridge, according to a report by Insurance Insider....