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Insurers brace for record Baltimore bridge claims

The Singapore-flagged container ship Dali was initially bound for Sri Lanka.

The collapse of Baltimore's Francis Scott Key Bridge could lead to record insurance claims, potentially costing insurers up to $4b, according to analysts as reported by Reuters.

Six people remain missing after the landmark bridge was destroyed in a collision with a Singapore-flagged container ship, prompting the closure of one of the busiest U.S. ports.

The ship reported earlier on through its black box that it had lost power and called for tugboat help before ploughing into the bridge.

READ MORE: Insurers could face losses of up to $4 billion after Baltimore bridge tragedy, analyst says

Insurers are assessing losses across various product lines including property, cargo, marine, liability, and more.

Marcos Alvarez from Morningstar DBRS estimates insured losses could range between $2b and $4b, surpassing the record set by the Costa Concordia disaster in 2012. 

Ship liability insurance, provided by Protection and Indemnity insurers (P&I Clubs), covers marine environmental damage and injury. 

The International Group of P&I Clubs, which insures 90% of the world's ocean-going tonnage, holds reinsurance cover up to $3.1b.

Whilst the total claim is expected to be high, it's unlikely to significantly impact individual reinsurers due to its distribution across many. The disaster is expected to increase marine insurance rates globally.

Initial estimates suggest the cost of rebuilding the bridge could reach $600m, to be covered by the federal government. The closure of the port for a month could result in a total loss of $28m for Maryland, causing widespread economic disruption and affecting businesses and individuals for years to come.

ALSO READ: Noto earthquake hit 22,000 homes, loss estimate still at $6b

How much will this cost insurers?

On the other hand, Jefferies Equity Research said the Baltimore tragedy, with potential losses estimated at $1b to $3b, was reinsured at Lloyd's, where MS&AD and Tokio have a presence through Amlin and Kiln. 

Under conservative assumptions, Jefferies estimates the losses shared by MS&AD/Tokio to be at most 2% or 1% of group profit. 

The ongoing hardening in the reinsurance market supports our view that consensus on Japan insurers' overseas earnings, especially for Amlin, is overly conservative.

The vessel, insured by Britannia P&I, is reinsured across the International Group of P&I Clubs (IG), with AXA as the lead reinsurer on the first layer of cover.

Despite the tragedy, 1QCY24 has been relatively uneventful from a global risk event perspective, suggesting losses may still be within budget. 

Following the accident, marine insurance rates are expected to increase to better reflect the risk going forward.

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