The Baltimore Bridge Disaster: Who is going to pay?

The collapse of the Francis Scott Key Bridge in Baltimore early Tuesday after it was struck by a container ship could trigger a wide swath of insurance and reinsurance policies, and the loss is likely to run into billions of dollars, sources say.

Beyond marine hull, cargo and liability policies, the incident could trigger various coverages including auto, contingent business interruption, inland marine, property, trade credit and workers compensation...

...London-based marine mutual insurer The Britannia P&I Club confirmed that the Dali is insured by the club for protection and indemnity liabilities. The vessel will also have hull and cargo coverage in place, sources said.

All 22 crew members on board, including two pilots, have been accounted for and there are no reports of any injuries among them, the owners and managers of the ship said.

In a statement, Synergy Marine Group, the vessel’s manager, said the owners and managers are fully cooperating with federal and state agencies. The exact cause of the incident has yet to be determined, they said, adding that there had been no pollution.

News reports said the ship may have lost steering after losing power before hitting the bridge. The bridge is valued upwards of $1.2 billion, though it is not known whether the insured limit on the property placement is that high, the Insurance Information Institute said. It is understood that Aon PLC handles the bridges and tunnels property placement for the state of Maryland.

Britannia Club is a member of the International Group of P&I clubs, an association of 12 P&I clubs that provides marine liability cover for 90% of the world’s ocean-going tonnage.

Individual clubs retain $10 million on any claim, and claims in excess of $10 million are shared between the group clubs. The group also buys group excess of loss reinsurance cover up to $3.1 billion in the open market. Axa XL leads the group excess of loss cover, according to information posted on the International Group’s site.

Excess of $30 million, the International Group pool is also reinsured by Bermuda-domiciled group captive Hydra Insurance Co. Ltd., an incorporated cell company. Each of the 12 Group clubs has its own segregated account or cell ringfencing its assets and liability from the other club cells.

The total cost of the bridge collapse and associated claims will not be clear for some time but is likely to run into billions of dollars and “well above the $100 million attachment point for the GXL contract,” rating agency A.M. Best Co. said Tuesday.

“The insurance issues due to the collapse of the bridge will take a long time to unravel and may involve several lines, such as property, cargo, liability, trade credit and contingent business interruption,” Best said.

“I would expect this event to exhaust limits, excess layers and reinsurance for most types of coverage carried by the ship’s operator,” Robert Hartwig, clinical associate professor and director, Risk and Uncertainty Management Center, at the University of South Carolina’s Darla Moore School of Business, said in an email.

Read the rest here.

Obviously the immediate concern is for those injured and the missing, who at this point are unlikely to be found alive. However, beyond the humanitarian concerns, a major component of transportation for Baltimore and the DC beltway region has been wrecked. One of the busiest harbors in the United States is now closed indefinitely with ships unable to enter and those already there, effectively trapped. President Biden has rightly promised emergency Federal aid to get the ball rolling on clearing the wreckage and at least beginning the construction of a new bridge. I don't think anyone needs an advanced degree in engineering to grasp that the current structure is a total loss and beyond repair. That said, the American taxpayer should not be on the hook for this. Marine insurance is a complicated business, but when the dust settles some very large checks are going to be expected. And while the economic damage is likely to run into the billions, I would hope that the first checks go to the families of those injured and killed. 

Prayers for all those affected.