P&C the May 2024 issue

A Mosaic of an Insurance Claim

The marine insurance industry can withstand Baltimore bridge catastrophe, experts say.
By Leader's Edge Staff Posted on April 30, 2024

The bridge collapsed; six people are presumed dead; and the port remains closed as of this writing.

Potential insurance claims remain uncertain, though S&P Global notes, “Total marine losses following the accident could prove to be the largest ever recorded, exceeding the close to $2 billion cost of the Costa Concordia disaster in January 2012.” S&P’s assumption includes property rebuild costs for the bridge, damage to the vessel and cargo, business interruption, and other liability losses.

“I think there are layers upon layers to this incident, both from a legal perspective and from an insurance perspective. We’ve begun referring to it as a mosaic of an insurance claim,” says Josh Kirklin, executive vice president at CAC Specialty.

The Liability Question

Grace Ocean, the Dali’s Singapore-based owner, and ship manager Synergy Marine have filed a petition to be covered by the Limitation of Liability Act of 1851, which restricts shipowners’ liability to the value of the vessel and pending freight. The legislation hinges on whether a shipowner had “privity or knowledge’’ of any negligence or bad act prior to the event.

“I think all eyes are on that legal filing to limit liability,” Kirklin says. “You know, it is such an old law, and we’re obviously in a new day. I think this is going to break fresh legal ground.”

The liability cap could be eliminated, Kirklin says. “I think in a certain case and a certain legal magnifying glass, that certainly is a potential outcome.”

I think all eyes are on that legal filing to limit liability. You know, it is such an old law, and we’re obviously in a new day. I think this is going to break fresh legal ground.
Josh Kirklin, executive vice president, CAC Specialty

Marine Market Remains Resilient

According to the International Union of Marine Insurance (IUMI), global marine insurance premiums in 2022 totaled $35.8 billion, an 8.3% uplift on 2021. The organization’s 2023 Stats Report attributed that to the post-pandemic rebound in trade and other factors.

The report also notes that insurers have been operating in a relatively low claims environment, but IUMI cautions a watchful eye as marine activity picks up.

Industry experts believe the market can sustain even major losses from the Dali disaster. S&P reports that Grace Ocean is insured under the Britannia P&I Club, part of the International Group of P&I Clubs (IG) that provides “[n]early all marine insurance globally.” The IG has ceded most of the risk to a pool of global reinsurers, led by AXA XL, which provides cover up to about $3 billion, the agency says.

While S&P predicts that the IG’s cost of reinsurance will likely increase following the event, the agency believes the loss is manageable and “further supported by the reinsurance sector’s strong underwriting performance in 2023.”

“I think the insurance markets are geared for this and losses of this profile and magnitude,” Kirklin says. “There are aspects to it—supply chain issues, trade credit issues—that are seemingly far-reaching. We just don’t know the magnitude of those yet…Every claim is different in every way, and this is certainly no exception to that.”

More in P&C

Premium Increases Flat to Down
P&C Premium Increases Flat to Down
The Council’s Commercial P/C Market Index for Q1 is here.
P&C Power Play
Insurers and insureds alike must face the glaring risks and vulnerabilities in t...
Property & Casualty Hard Market Turns 6
P&C Property & Casualty Hard Market Turns 6
It may not happen immediately, but signs point to softening of P&C rates.