Baltimore bridge insured losses could reach $4bn – Morningstar DBRS

Insured losses from the Francis Scott Key Bridge could be between $2bn and as much as $4bn, according to a new rating agency estimate from Morningstar DBRS.

The Port of Baltimore remains closed to ships since the container ship Dali, chartered by Maersk, smashed into a pillar of the Francis Scott Key Bridge, causing it to collapse into the Patapsco River.

There have been two deaths confirmed, with several people missing, since the disaster occurred on March 26.

While there were no injuries on the Dali, several vehicles driving on the bridge were seen falling into the river.

Depending how long shipping is disrupted by the Port of Baltimore’s closure, business interruption and contingent business interruption losses could increase the overall size of the insured loss.

Last year, Baltimore handled $80bn in cargo and reportedly more than 14,000 jobs depend on the natural harbour. It is the busiest port in the US for car shipments, as well as being a major export route for the coal shipping trade.

“If the Port of Baltimore has contracted business interruption insurance, we estimate that total insured losses will be in the $2bn to $4bn range,” said Morningstar DBRS analysts.

The low-end of the insured loss range estimate mentioned by Morningstar surpasses the $1.5bn claims bill from 2012’s Costa Concordia record marine loss event, which grounded and capsized off the Italian coast.

In comments made to the Financial Times, Lloyd’s CEO John Neal has said the insurance market should “just get on with it” and begin paying out for the Baltimore disaster.

The marine reinsurance market could end up paying a large portion of the claims, through its reinsuring of the International Group (IG) of protection and indemnity (P&I) clubs, that mutually insure third party damages and buy reinsurance together as a group.

Reportage from The Insurance Insider notes that US carrier Chubb is the lead insurer of the bridge itself, while the Dali was insured by Britannia P&I Club, which bought $3bn of liability reinsurance protection bought through the IG.

In his comments to the FT, Neal referenced that clearing, repairing and rebuilding the bridge is likely to cost at least a $1bn claim, while the P&I element is likely to add considerably to that figure.

The cost is likely to be widely spread among the marine reinsurance market, including subrogation of the claim, analysts suggested.

“However, in our view, these losses will add to the woes of marine insurers who have been facing recent challenges due to the Houthi rebels’ attacks in the Red Sea,” Morningstar DBRS said.

”We also anticipate that the losses linked to the collapse of the Baltimore bridge will add upward pressure to the pricing of marine insurance coverages globally,” the rating agency added