Insured losses from bridge collapse could reach $4bn and harden marine market: Morningstar
Insured losses from the collapsed Francis Scott Key Bridge that was struck by a container ship and disruption to the Port of Baltimore could total up to $4bn, says DBRS Morningstar.
The loss could add upward pricing pressure to marine insurance rates globally, the rating agency adds.
Total insured losses could surpass the 2012 Costa Concordia disaster, which resulted in a record marine insurance loss of around $1.5bn, Morningstar says.
Depending on the length of the port’s blockage and the nature of business interruption coverage it carries, “insured losses could total between $2bn and $4bn”, DBRS Morningstar predicts.
Despite the potential for outsized losses, Morningstar expects they will remain manageable for the global insurance industry as claims will ultimately be paid by a large and diversified pool of insurers and reinsurers.
The bridge collapse could affect multiple insurance policies, including marine liability and hull, property, cargo and business interruption.
“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,” said Marcos Alvarez, managing director at Morningstar.
Property insurance policies are also likely to be triggered as it is understood the bridge was insured, Morningstar says.
The property policy for the Port of Baltimore could also include business interruption coverage that would protect the owner against financial losses due to the decrease in shipping traffic.
“We anticipate that litigation will immediately ensue to determine legal responsibility for the involved parties and their insurers,” Morningstar says.
Subrogation among insurers is likely to follow. If courts determine that the ship owner is liable for the accident, insurers of the bridge and the port can recover insured losses from its liability insurers, the rating agency says.
Given the potential legal liability of the container ship operator for loss of life, physical damage to the bridge and business interruption to the port for a relatively extended period of time, protection and indemnity liability insurance will play a crucial role, the report says.
London-based marine mutual insurer The Britannia P&I Club confirmed on Tuesday that operator Dali is insured by the club for protection and indemnity liabilities.
Reinsurers participating in the International Group of P&I Clubs’ reinsurance pool will bear most of the insured losses of this event, Morningstar says.
At least six construction workers are presumed dead after the Singapore-flagged Dali, owned by Grace Ocean Pte Ltd, collided with one of the pillars of the bridge.
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