Reinsurers, marine market to bear brunt of Baltimore Bridge collapse

Reinsurers, marine market to bear brunt of Baltimore Bridge collapse
Reinsurers, marine market to bear brunt of Baltimore Bridge collapse

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The Singapore-registered container ship Dali suffered an accident at the Francis Scott Key Bridge in Baltimore on March 26. Rescuers were searching for at least seven people, authorities said, while two others were rescued from the Patapsco River.
Source: Rob Carr/Getty Images via Getty Images.

The collapse of a bridge near the port of Baltimore will have major implications for reinsurers and the broader marine insurance market as one of the busiest ports in the mid-Atlantic shuts down.

The Francis Scott Key Bridge fell into the water in the early morning of March 26 after being struck by a cargo ship leaving the harbor for Colombo, Sri Lanka. Maryland Gov. Wes Moore declared a state of emergency and emergency responders swung into action.

The crew aboard the Singapore-registered container ship Dali notified the Maryland Department of Transportation just before the incident 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 liabilities that could take years to unravel, the financial fallout is expected to fall heavily on the reinsurance industry.

«There is no doubt that both marine insurers and reinsurers will be involved in this loss,» he said Loretta Worters, spokeswoman for the Insurance Information Institute.

Lessons in responsibility

Dali is owned by Grace Ocean Pte. Ltd., operated by Synergy Marine Pte. Ltd. and is covered by The Britannia Steam Ship Insurance Association Ltd. or the 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 flying Dali have been found, according to a statement from a Britannia P&I Club Speaker. The statement noted that «the exact cause of the incident is yet to be determined.»

The cost of the bridge itself could be around $1.2 billion; it is not yet known whether the insurance limit on the disposition of the property will fully cover the replacement, said Worters. Insurance Insider announced that Chubb Ltd. is the lead insurer of the bridge itself, but any claims are likely to be subrogated to ship owner’s insurance.

The incident will hit the International Group of P&I Associations hardest, according to Worters, who said the group has significant reinsurance coverage led by AXA XL. Worters also said that it was her understanding that Aon PLC covered the placement of bridge and tunnel properties for the state of Maryland.

Complexity of claims

The severity has not yet been determined, but the accident will affect several different lines of business.

Bridges are typically covered by the domestic marine insurance market, Walters said. Liability insurance also protects bridge owners from lawsuits arising from accidents and injuries.

Business interruption insurance can also be a factor, as it also serves to compensate for loss of revenue or expenses incurred during bridge repair or reconstruction, Worters said.

«This collapse is likely to cause a huge disruption to both shipping … and roads, so there could be supply chain issues,» Worters said.

Liability lawsuits certainly descend for losses resulting from injuries and deaths.

«There’s also debris cleanup and reconstruction costs that are going to be huge,» Worters said.

No major environmental impact is expected, for example due to the grounding of an oil tanker. Britannia P&I Club said in a statement no contamination was associated with the incident.

The incident bears some resemblance to the May 1980 collapse of the Sunshine Skyway Bridge in Tampa, Florida. In that incident, the M/V Summit Venture collided with one of the bridge piers during a storm in Tampa Bay, sending a 1,200-foot section of the bridge into the bay below, killing 35 people.

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