Depending just how long the Port of Baltimore is blocked for after the collapse of the Francis Scott Key Bridge, and the nature of the Port’s business interruption coverage, insured losses could land between $2 billion and $4 billion, according to analysts at Morningstar DBRS.
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Even at the low-end of the insured loss range, it would still surpass the $1.5 billion insured losses of the Costa Concordia event, which capsized in 2012 and became the record marine insured loss.
A significant section of the Baltimore bridge, which first opened in 1977, collapsed soon after it was struck by the Dali container ship in the early hours of March 26th. The damage is extensive and impacts far-reaching, and the accident has claimed lives with numerous people still missing.
Last year, the Port handled more than $80 billion in cargo and reportedly over 14,000 jobs depend on the natural harbour, which is also the busiest port in the US for car shipments.
As we wrote yesterday, the length of the blockage is still unclear, but there’s concern it could be the largest example of port blockage seen by the insurance market in recent years.
The event is expected to trigger a large number of insurance policies, including marine liability and hull, property, cargo, and business interruption.
Analysts at Morningstar DBRS say that preliminary report assessments point to insured losses of several billions of dollars.
“If the Port of Baltimore has contracted business interruption insurance, we estimate that total insured losses will be in the $2 billion to $4 billion range,” say analysts.
Despite the potential for this event to trigger a record marine insured loss, analysts expect that losses will remain will within the absorption capacity of the global insurance industry.
This is due to the way P&I Clubs, a sector dominated by the members of the International Group of P&I Clubs, which provide liability cover for many vessels, mutually reinsure each other by sharing claims above USD 10 million as part of their pooling arrangements, meaning that the losses from this event will ultimately be paid by a large and diversified group of insurers and reinsurers.
“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. 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,” say analysts.
As highlighted by Morningstar DBRS and others since the accident, members of the Group purchase general excess of loss reinsurance for up to $3.1 billion above an attachment point of $100 million, and it’s expected that reinsurers participating in the Group’s reinsurance pool will bear most of the insured losses of this event.
