Insurers brace for multi-billion dollar losses after Baltimore ship tragedy

By Thomson Reuters Mar 27, 2024 | 10:57 AM

By Sinead Cruise, Jonathan Saul and Carolyn Cohn

LONDON (Reuters) – Baltimore’s Francis Scott Key Bridge collapse could cost insurers several billions of dollars in claims, sources say, but it is too early to calculate the likely full financial losses of the tragedy that has shuttered one of the busiest ports in the United States.

Six people are still missing after a collision with a Singapore-flagged container ship destroyed the landmark bridge on Tuesday, forcing the closure of the Port of Baltimore.

With little clarity on when the port 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.

“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,” said Mathilde Jakobsen, senior director, analytics at insurance ratings agency AM Best.

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.

According to AM Best, the group holds general excess of loss reinsurance cover up to the value of $3.1 billion.

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 the container ship 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”.

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.

(Reporting By Sinead Cruise, Jonathan Saul, Carolyn Cohn and Noor Hussain; Editing by Andrea Ricci)