The total cost of a Baltimore bridge collapse and associated claims could run into the billions of dollars and add to challenges in the reinsurance market, AM Best said today.

The central section of the 2.6 kilometre Francis Scott Key Bridge collapsed around 1:30am on Tuesday, Baltimore time, when a container ship crashed into a support pylon as it lost control when heading out from the port. 

AM Best says reinsurers will bear the bulk of the insured cost of the collapsed bridge. Liability cover for most shipping vessels is provided through protection and indemnity insurers known as P&I Clubs. 

“While the total cost of the bridge collapse and associated claims will not be clear for some time, it is likely to run into the billions of dollars,” Senior Director, Analytics Matilde Jakobsen said. 

“The insurance issues due to the collapse of the bridge will take a long time to unravel and may involve several lines such as property, cargo, liability, trade credit and contingent business interruption. The claim will likely involve several insurers, reinsurers, subrogation, and legal issues and will serve to add to the increasing challenges in reinsurance availability.” 

AM Best says the P&I segment is dominated by the members of the International Group of P&I Clubs which collectively insures about 90% of the world’s ocean-going tonnage. 

As part of the International Group’s pooling arrangements, member clubs mutually reinsure each other by sharing claims above $US10 million ($15 million), and the group buys general excess of loss reinsurance cover up to $US3.1 billion ($4.7 billion) in the open market, with a $US100 million ($153 million) attachment point. 

Insurance Insider reported that Chubb is the lead market on the property placement for the bridge, but given the circumstances there’s a high likelihood that the property claim will be subrogated to the shipowner’s insurance. 

The Singapore-flagged Dali, owned by Grace Ocean and operated by Synergy Marine, was carrying Maersk customers’ cargo. It has been reported that the ship was covered by Britannia P&I Club, which is part of the International Group. 

“The Key Bridge collapse in the US will likely lead to substantial insurance claims against the vessel’s insurers related to the ship and its cargo, but more significantly the destruction of the bridge and disruptions to the port,” Moody’s Ratings VP Senior Credit Officer Brandan Holmes said. 

The majority of claims will fall to global (re)insurers given arrangements with P&I clubs and while the total claim is expected to be high, it is unlikely to be significant for individual (re)insurers since it will be spread across so many, he says. 

Insurance Insider says there are concerns that losses from the bridge collapse could exceed the $US1.5 billion ($2.3 billion) paid out on the 2012 sinking of the Costa Concordia cruise ship, which capsized after running aground off the Italian island of Giglio. 

Dali operator Synergy reported to the Maritime and Port Authority (MPA) of Singapore that just prior to the incident, the vessel had experienced momentary loss of propulsion.  

“As a result, it was unable to maintain the desired heading and collided with the Francis Scott Key bridge,” the MPA said. “The vessel was reported to have dropped its anchors as part of the vessel’s emergency procedures prior to its impact with the bridge. The vessel was under pilotage at the time of the incident.” 

The ship’s crew notified authorities that they had a power issue before the collision, and cars were stopped from going over the bridge. 

Eight construction workers were repairing potholes on the structure when it collapsed, with six people missing. All 22 members of the ship are safe and accounted for. 

The Port of Baltimore says vessel traffic has been suspended until further notice, while truck activity is continuing at the port. 

The Francis Scott Key Bridge, which opened in March 1977, is named after the author of the words of the US national anthem, The Star Spangled Banner.