Baltimore bridge supply chain insurance losses likely

The collapse of the Francis Scott Key Bridge in Baltimore in March could well result in supply chain-related losses under commercial property insurance policies, a source has told Commercial Risk.

On 26 March, containership Dali collided with the Francis Scott Key Bridge in Baltimore, killing six people. The incident blocked access to the Port of Baltimore, one of the busiest in the US for specialised and automotive cargo. Analysts have predicted the disaster could cost the insurance industry between $2bn and $4bn, making it the largest marine insurance claim ever.

“It’s a complicated claim and one that our claims team is investigating right now. But it is likely to be a huge potential claim for the industry at large, and it could be very complex, affecting companies upstream in the supply chain,” a spokesperson for a leading commercial insurer said. It ultimately depends on what proportion of the supply chain impact will be insured, they added.

In addition to marine hull, liability and cargo losses, the insurance industry is likely to face claims from companies under their commercial insurance policies. For example, companies that rely on the Port of Baltimore for their supply chains may claim under ‘ingress/egress’ extensions in their property business interruption (BI) insurance, which cover losses associated with loss of access due to a covered peril or a civil authority closure order.

“There will be ripples throughout many lines of business. The secondary impact is yet to be determined,” the spokesperson said.

Insurer appetite for contingent and non-damage BI coverage has been limited following several large loss events in recent years. The 2011 Tohoku earthquake in Japan and floods in Thailand caused extensive disruption and contingent BI claims for insurers, as did the Texas Big Freeze and resulting power outages in 2021. Several fires and floods have impacted the semi-conductor and automotive industry over the past decade and caused supply chain disruption and BI losses.

Over the years, insurers have tightened non-damage and contingent BI cover under property insurance policies. Most recently, the insurance market clarified or excluded BI cover related to communicable diseases under property policies following the Covid-19 pandemic.

Incidents like the Baltimore bridge disaster will likely only reinforce insurers’ stance towards contingent BI cover and concerns for aggregations of risk. However, significant changes to contingent BI cover as a result of the Baltimore bridge incident are unlikely due to its isolated nature, the spokesperson said.

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