Six people are still missing after a collision with a Singapore-flagged container ship destroyed the landmark bridge on Tuesday, forcing the closure of one of the busiest U.S. ports.
With little clarity on when the Port of Baltimore would re-open, insurers and analysts are now assessing the likely losses borne by underwriters across several product lines including property, cargo, marine, liability, trade credit and contingent business interruption.
“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. That would surpass the record insured losses of the Costa Concordia luxury cruise liner disaster in 2012, he said.
Mathilde Jakobsen, senior director, analytics at insurance ratings agency AM Best, also said the claims would likely run into “billions of dollars”.
Ship liability insurance, which covers marine environmental damage and injury, is provided through protection and indemnity insurers known as P&I Clubs. The International Group of P&I Clubs collectively insures approximately 90% of the world’s ocean-going tonnage and member P&I clubs mutually reinsure each other by sharing claims above $10 million. The IG Group declined to comment. According to AM Best, the group holds general excess of loss reinsurance cover up to the value of $3.1 billion.
SPREADING THE COST
Moody’s Ratings analyst Brandan Holmes said approximately 80 different reinsurers provided that cover to the ship’s insurers.
“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 said.
Insurer Britannia P&I said in a statement that vessel, named the Dali, was entered with the club, adding that it was working closely with the ship manager and relevant authorities “to establish the facts and to help ensure that this situation is dealt with quickly and professionally”.
Loretta Worters, spokesperson at the Insurance Information Institute, said AXA XL was the lead reinsurer on the first layer of cover for IG’s reinsurance programme, with other global reinsurers also involved. AXA XL did not immediately respond to request for comment.
Alvarez said the disaster would likely put upward pressure on marine insurance rates globally.
Worters added she believed Aon was the insurance broker for the property policy for the bridge. Insurance Insider reported that Chubb was the lead underwriter for the policy. Aon and Chubb declined to comment.
Initial estimates of the cost of rebuilding the bridge, which is likely to be paid by the federal government, are at $600 million, economic software analysis company IMPLAN said.
The closure of the port for just one month could see a total loss of $28 million for the state of Maryland, according to IMPLAN analysis.
“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,” said Julien Horn, partner, Ports & Terminals and Logistics, at insurance broker McGill and Partners.