Indeed, some are already talking about the worst marine claim in history, with sources predicting the claim on the reinsurance programme of the International Group (IG) of P&I Clubs will exceed the ~$1.5bn paid out on the 2012 Costa Concordia sinking.
The value of the property damaged alone is over $1bn, sources said, whilst the potential liability exposures from a complex wreck removal, major disruption to a port, and any loss of life only add to the worrying picture.
All this is turbo-charged by the fact the incident took place in the US, a hotbed for spiralling liability settlements and social inflation in which wrongful deaths can command $50mn payouts.
Based on a series of conversations with sources in the market, the general sentiment is that the claim from Baltimore could pummel the marine reinsurance market with a claim spiralling into the billions of dollars. The largest part of the loss will be ceded to reinsurers and retro writers, sources warned.
Some fear we are looking at the largest marine liability claim since the Costa Concordia, which eventually cost the market around $1.5bn, whilst others are even more pessimistic, talking of a loss that could reach into the upper layers of the International Group’s $3.1bn reinsurance tower.
One Lloyd’s market source said that they were concerned the event could be a full-limit loss to the $3.1bn IG programme.
Despite significant uncertainty, at this early stage it appears that mariners are facing a market-changing event, which could have ripple effects on the scale that the Boeing claim has inflicted on the aviation reinsurance market.
Given the likely scale of reinsurance losses, rapid hardening in that market seems a high likelihood, although the renewal calendar is highly weighted to 1 January.
Tallying the costs
Observing the incident in Baltimore from any angle creates an ever-spiralling succession of potential liability exposures.
First and most obvious is the damage of the bridge, unquestionably a total loss.
Insurance Insider reported that Chubb is the lead market on the property placement, and the bridge is valued at around $1.2bn. It is not clear at this stage whether the insured limit on the property placement stretches to the full value.
P&I coverage provides third-party liability insurance for vessels, including damage to fixed and floating objects, such as bridges.
Sources said that the likely scenario is the property market will pay the loss and subrogate to the marine market.
But that is just the beginning.
Next of immediate consideration is the potential, tragic loss of life.
At the time of going to press, rescuers were searching for seven people plunged into the water when the bridge collapsed.
Loss of life in US liability in an age of social inflation attracts vast settlements, with sources pointing towards ballpark figures of $50mn-$100mn per person.
Then there is the highly complex removal of wreck to consider, with the girders of a 1.6-mile long bridge twisted and crumpled across the Patapsco River.
As the 2020 loss of the Golden Ray demonstrated, such challenging maritime clean-up operations can take years and cost hundreds of millions. That loss ended up costing the market over $800mn.
After that, consider the vast consequential claims, legal disputes and inevitable losses from the destruction of a major four-lane road bridge servicing a major city, and the huge disruption to the port.
According to the Maryland Transportation Authority, the bridge carries 11.3 million vehicles per year.
As for the port, it is the busiest in the US for car shipments, handling more than 750,000 in 2023, according to Reuters.
According to data from Skytek, there are three bulk carriers, one vehicles carrier and a tanker blocked in the port, and ten other ships waiting in Chesapeake Bay waiting for a Baltimore berth.
AIS data shows there are a further 40 ships listing Baltimore as their next port of call.
In a litigation-hungry country, actions will be flying from all sides as parties seek to recoup their losses, with some costs inevitably likely to fall on insurers.
Where the loss lands
Such a large and sprawling claim will leave few who participate in the marine liability and marine reinsurance market unscathed, and inevitably filter through to land most heavily on the large reinsurers.
The sheer scale of the IG’s $3.1bn reinsurance tower, which is led by Axa XL, results in participation from across the marine (re)insurance market.
Major marine reinsurance markets include: Hannover Re, Swiss Re, Munich Re and RenRe (Validus).
As things stand, a further shake-up of underwriting conditions in the class looks inevitable.
This comes soon after what was already perceived to be a dramatic re-rating and alteration of terms in marine reinsurance at 1 January 2023, when the market moved to respond to heavy war losses stemming from Ukraine.
At the subsequent renewal this January, rating was more stable, with reinsurers focusing on maintaining the pricing and conditions that had been achieved.
With this claim set to massively dwarf what the marine market picked up from Ukraine, with war losses of approximately $450mn, the ensuing impact could be dramatic.
Clean-up begins
Operations are already mobilising to deal with the incident.
Brittania P&I said in a statement: “We are working closely with the ship manager and relevant authorities to establish the facts and to help ensure that this situation is dealt with quickly and professionally.
“In the meantime, our thoughts are with everyone affected by this incident.”
The unique structure of the IG’s reinsurance arrangements and the collective claims handling expertise in the market will now be thrown into coping with the aftermath of a seismic day for the maritime industry.
Insurance Insider delivers global wholesale, specialty, and (re)insurance Intelligence that enables you to act first. Redeem your complimentary 14-day trial for more premium content from Insurance Insider.
Scan here to download the app