Baltimore incident likely to drive up marine insurance rates

Marine insurance pricing is likely to increase following the collapse of the Francis Scott Key Bridge in Baltimore, some experts say. The costs of cleaning up the bridge and container debris, moving the vessel so that the channel and port can safely reopen to shipping traffic, and a lengthy process to rebuild the bridge, are among the complicating factors that will add to the scale of this loss. Assuming the loss is significant, the likely outcome is “an increase in pricing”, said Marcus Baker, global head of marine, cargo, and logistics for Marsh. “There is a complexity to this loss that we haven’t been able to figure out yet, because we don’t know how big it is,” he said. After three years of hardening with price increases and tightening conditions, the marine market had recently shown some signs of softening as profitability improved and insurers looked to secure more business, continued Baker. “Post-Baltimore, I think it’ll arrest that reduction. People will be more cautious over the course of the next few months until they understand where things are from their perspective,” Baker said. Andrew Kligerman, managing director in equity research at TD Cowen, a division of TD Securities, said the marine market was already seeing upward pressure on pricing due to the Houthi rebel attacks in the Red Sea. “With this massive accident, it will likely put even more upward pressure” on primary and reinsurance pricing, more sharply at the primary level, Kligerman said. Rahul Khanna, global head of marine risk consulting at Allianz Commercial, noted market pricing is impacted by many different things and the insurance industry is spread across the globe. “We have seen large incidents in the past being absorbed by the industry without much impact,” he said. Fortunately, this is not the type of accident that happens frequently, and total shipping losses have declined by as much as 65% in the last decade, Khanna said. “If you look at the big picture, the shipping industry in general has done pretty well. The loss data suggests that the safety improvements have had the desired effect,” he said. It’s too soon to comment on this emerging loss and its impact on reinsurance availability and pricing, the Reinsurance Association of America said. Munich Re and Swiss Re declined to comment. Grace Ocean, the owner of the Singapore-flagged Dali ship that struck the bridge, is an insured member of the Britannia P&I Club. 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 $10m on any claim, and claims in excess of $10m up to $100m are shared between the group clubs. The group also buys around $3bn in group excess of loss reinsurance cover, which is led by AXA XL and spread among 80 reinsurers. In a report issued last week, S&P Global Ratings said the Baltimore bridge accident could cost more than $3bn and still only dent insurers’ earnings. “We predict that the International Group’s cost of reinsurance will most likely increase following the event,” S&P said. Most of the loss is expected to fall on the marine P&I liability and cargo markets, so any impact on the property insurance market is expected to be limited, several brokers said. Alex Glickman, senior managing director, global practice leader, real estate and hospitality, at Arthur J Gallagher, said that in addition to the bridge’s property coverage, business interruption coverage could apply to supply chain issues. “I don’t think anybody knows the quantum right now, but there’s an opportunity obviously for subrogation against the P&I club,” Glickman said. There won’t be a massive effect on the global property market, said Mike Prindle, senior vice president and head of complex property at CAC Specialty. “Since the ship that ran into the bridge caused it to go down, I would imagine that it’s going to be more of a liability claim”, but it could put a spotlight on bridge and tunnel exposures, Prindle said. Matthew Lerner contributed to this report. This article first appeared on our sister website Business Insurance. For further news from Business Insurance, please click here.

Baltimore incident likely to drive up marine insurance rates

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