As the fallout from the collapse of the Baltimore bridge last Tuesday continues, analysts at Fitch Ratings have said that although a tragic disaster with significant economic repercussions, the event will have a limited impact on individual reinsurers earnings and thus is unlikely to have any impact on ratings.
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Currently, total insured loss estimates for the Baltimore bridge event are between $2 billion and $4 billion, with reinsurers participating in the International Group of Protection and Indemnity (P&I) Clubs’ pool expected to bear most of the losses.
Collectively, the P&I loss is expected to be material, but because of the way the P&I clubs $3 billion of reinsurance cover is shared among more than 80 reinsurers, including over 20 of the top 25 players, it’s expected to be a limited earnings event for carriers and therefore not have a rating impact on large reinsurers.
The reinsurance policy is led by AXA XL, with participation from other large, global players such as Munich Re, Swiss Re, SCOR, Hannover Re, and the specialist Lloyd’s insurance and reinsurance marketplace.
“Syndication of the reinsurance program leads to limited participation in the gross losses for individual reinsurers. Likewise, insurance coverage on the bridge is understood to be heavily reinsured, and losses will likely subject to subrogation from the responsible parties,” says Fitch.
The bridge collapsed after it was struck by a container ship in the early hours of Tuesday morning, claiming six lives and leading to the Port of Baltimore being closed to ships. As noted by Fitch, the ultimate economic and insured loss from this event remain unclear, and will depend on the length of the blockage and also the nature of business interruption coverage.
“Disruptions to port traffic will persist for months while the bridge debris is cleared and a new bridge is constructed,” warns Fitch.
It might well become the largest example of port blockage seen by insurers in recent times, according to reports.
A total insured loss of between $2 billion and $4 billion would make this event the largest marine insurance claim ever, surpassing the approximately $1.5 billion of losses from the capsizing of the Costa Concordia in 2012.
As efforts continue to remove debris from the water, officials in the US have said that a temporary alternative route for ships is to be opened in an effort to limit the disruption and impact on supply chains.
“The incident will affect marine liability and hull, property, cargo and business interruption business lines. Longer term, unanticipated multi-billion dollar events, derived from natural or man-made acts, influence insurers’ risk appetite and willingness to provide underwriting capacity, which will foster continuation of positive pricing trends, and support market hardening in the marine insurance market in particular,” concludes Fitch.
