Marine market converges on $1.5bn-$2bn Baltimore bridge loss estimate

Despite initial concerns the Francis Scott Key Bridge collapse in Baltimore would result in a record-breaking loss for marine (re)insurers, market sources have said underwriters now expect the liability portion will range from $1.5bn to $2bn.

The loss occurred after container vessel Dali struck one of the bridge’s support columns on 26 March, causing it to collapse. The incident resulted in the deaths of six people.

Fears quickly grew that the event would result in a record loss for the marine market. Early market loss expectations ranged from $1.5bn to $4bn, surpassing the close to $2bn loss that arose following the Costa Concordia’s sinking in 2012.

The Dali is entered with Britannia P&I Club. As such, the bulk of the claim is expected to fall on the International Group of P&I Clubs’ vast $3.1bn pooling and group excess of loss reinsurance program.

While the International Group is yet to issue a loss estimate, the marine market now expects the casualty will be at the lower end of initial estimates, with industry sources canvassed by this publication having seen provisional loss expectations of $1.5bn to $2bn.

However, sources emphasized that there remains significant uncertainty over how the loss may develop in the coming months, notably regarding ongoing legal and legislative processes in the US related to the incident.

The Dali’s owner Grace Ocean and its manager Synergy Marine are in ongoing litigation to limit their liability to $43.67mn under an 1851 maritime law, with an expectation this process will be lengthy and subject to various levels of appeal.

In September the US Justice Department filed a civil claim against the Dali’s owner and operator, seeking more than $100mn.

Definitive estimates have also been muddled by legislation from US representatives that may alter the 1851 maritime law. If passed, the legislation would increase liability for foreign-flagged ships to 10 times the value of the vessel and its cargo, minus expenses.

Crucially, that would be applied retroactively to the Baltimore bridge claim.

Retro hit could cause further tightening

Should losses exceed $1.5bn, sources said losses would begin to be shouldered by the marine retrocession market.

Any substantive loss impact to the marine retrocession market would place further pressure on a sector that has already seen a major tightening of capacity, sources said.

One factor already driving this tightening, sources said, was Tamesis Dual’s inability to find replacement capacity at 1 April 2024 – with the firm understood to now only be writing on Tokio Marine Kiln paper.

Sources said marine retro cover, which is generally placed at 1 April, is expected to see small rate rises regardless of the Baltimore bridge loss quantum. If losses do exceed $1.5bn – the approximate point at which marine retro coverage attaches – then the rate rises would be greater.

Following the Baltimore bridge loss, Gallagher Specialty has said shipowner members within the International Group’s 12 P&I mutuals would be prudent to anticipate double-digit rate increases when the collective XoL program renews on 20 February 2025. The event’s impact on broader marine liability reinsurance rates is expected to be muted, however.

Earlier this year sources said that direct marine liability rates had increased by 10-15 percent since the bridge’s collapse.