This post is part of a series sponsored by AgentSync.
Once in a while, we get to cover an insurance story that coincides with current events. In the past, we’ve explored the insurance ramifications of things like the Johnny Depp/Amber Herd case and the fall of cryptocurrency exchange FTX.
Sadly, the latest instance of insurance in the headlines is a much more solemn event: the tragic cargo ship crash that resulted in Baltimore’s Francis Scott Key Bridge collapsing and killing six workers. This accident involved public infrastructure, private industry, and even international business stakeholders from Denmark (the ship’s charterer, Maersk) to Singapore (the ship’s owner, Grace Ocean Pvt. Ltd, and manager, Synergy Marine Group). Not surprisingly, it also involved a lot of insurance policies.
As the state of property and casualty insurance remains precarious due to high loss ratios from climate-related catastrophes, the last thing insurance carriers and reinsurers wanted or needed was a “mass casualty event,” which should have been avoidable. Unfortunately, accidents happen. And now, the entire world’s eyes are on the main characters of this story, including Baltimore, the state of Maryland, the ship’s owner, the ship’s charterer, and the many insurance companies standing behind each entity.
Who has insurance on the Francis Scott Key Bridge?
As of now (although we hardly expect this to be a comprehensive list), news outlets are reporting a variety of stakeholders with insured interests in the bridge, the ship, the ship’s cargo, and more.
These include:
The Maryland Transportation Authority (MDTA): This government organization is “responsible for constructing, managing, operating and improving the State’s toll facilities, as well as for financing new revenue producing transportation projects.” As such, it makes sense that MDTA has a $350 million property insurance policy and a $150 million liability policy, both of which the agency has reportedly filed claims with.
The Dali cargo ship: The vessel that crashed into the Key Bridge was insured by Britannia P&I, the oldest and one of the largest Property and Indemnity (P&I) insurers in the world. Insurance Business Magazine reported that all together, the International Group of P&I Clubs (IGP&I) of which Brittania is a part, has more than $3 billion of reinsurance cover. No doubt, many of the IGP&I member companies will be responsible for some portion of the damages, as they have a heavy presence insuring and reinsuring the marine markets.
Grace Ocean Pvt. Ltd and Synergy Marine Group: The ship’s owner and management company, respectively, are both based in Singapore and hold massive insurance policies on the ship. Together, these companies filed a petition in U.S. District Court to limit their liability (and thus their insurance companies’ obligation to pay) based on the Limitation of Liability Act of 1851. It remains to be seen whether a judge will grant this request, based on claims from the ship’s owner and manager that there was no fault or negligence involved in the accident.
In addition to these policyholders, we can expect insurance beneficiaries to include the families of those workers killed in the accident along with the many businesses now incurring financial losses due to the port’s shut down itself, or the resulting supply chain interruptions.
The Key Bridge collapse’s impact on the larger insurance industry
While experts and analysts are saying the insurance losses from the Key Bridge collapse could become the largest marine loss in history, no one’s calling for doom and gloom within the wider industry yet. Thanks to a diverse and well-funded network of insurance carriers and reinsurers, the potentially $4 billion loss will be “spread through the whole global reinsurance market,” according to John Miklus, the president of the American Institute of Marine Underwriters, as reported by CNN.
Because of how the system’s designed, even a loss this large is still one that the insurance industry is prepared to absorb. Bruce Carnegie-Brown, chair of Lloyd’s of London, told CNBC that the amount of insurance payouts that come from the Key Bridge collapse may be “the largest-ever marine insured loss, but not outside parameters that we plan for.” This is good news for an industry that’s already facing ongoing catastrophic losses from wildfires, flooding, and hurricanes, among other frequent natural disasters.
To learn more about how insurers remain solvent and the role of reinsurance, check out this article from our blog.
Baltimore’s Key Bridge collapse has implications for many types of insurance policies
When we think about an event as significant as the Key Bridge Collapse, one that shuts down an entire seaport, the insurance claims go far beyond the property (the bridge, the ship, and its cargo). From liability, to life insurance, to directors and officers, to business interruption, these are the most likely types of insurance policies that’ll pay claims because of the Key Bridge collapse.
Property insurance: Whether it’s the ship, the bridge, cars that fell into the water when the bridge collapsed, or other types of property that were damaged in the accident, property insurance claims will help property owners with the costs of repairing or replacing their physical property.
Marine liability insurance: As opposed to property insurance, liability insurance (also called casualty insurance) is responsible for paying claims for damages that go beyond damaged property. In the case of the Key Bridge collision and collapse, two people were killed, four more are presumed dead, and two people survived with minor injuries – although the emotional toll the traumatic incident has on them and their ability to work in the future remains to be seen.
Liability policies held by everyone from the companies performing work on the bridge at the time of the crash to the ship’s owners and management to the Port of Baltimore itself will see claims. Once investigations uncover which entities were legally at fault, we’ll have a clearer picture of which policies will have to pay, and how much.
Life and accidental death & dismemberment (AD&D) insurance: If the workers killed in the Key Bridge collision were employed, rather than contracted, their employer may have provided them with a life and AD&D policy. If this is the case, the workers’ beneficiaries would receive a death benefit along with an additional benefit based on the accidental nature of their deaths. No amount of money can bring a loved one back, however, these types of death benefits can ease the burden of funeral and other expenses.
Cargo insurance: Cargo insurance specifically covers the value of the cargo a ship was carrying at the time of an accident. If the cargo was somehow undamaged, then its owners wouldn’t need to file a claim. In the case of the Key Bridge collapse, the Dali was carrying around 4,700 shipping containers – only half of its total capacity. Despite not being full, the Dali’s cargo consisted of a large variety of items, including hazardous materials, some of which leaked into the Baltimore Harbor, according to the National Transportation Safety Board. The cargo’s owners will likely have large cargo insurance claims to file to recover the costs of their materials and possibly largescale cleanups.
Directors & Officers (D&O) insurance: This type of policy protects directors and officers of companies from legal costs and settlements that arise during the course of doing business. While no D&O claims have been reported in the news as of yet, they could emerge if information comes out that someone in a leadership position at the ship’s owner or management company made a mistake or acted negligently in a way that contributed to the accident.
Trade credit insurance: Since the Port of Baltimore is the country’s top site (by volume) for importing and exporting vehicles, there are going to be a lot of businesses (car dealerships, for example) that can’t sell vehicles while the port remains closed or at limited capacity. Without products to sell, these businesses may have trouble paying their own bills, which is where trade credit insurance comes in. This type of policy helps businesses stay afloat when there’s a sudden interruption to its own commercial customers’ ability to pay. Companies further down the supply chain may be able to get claims paid through their trade credit insurance policies if their customers can’t pay their bills because of the sudden halt of imports coming through Baltimore.
Business interruption insurance: Many businesses directly rely on the Port of Baltimore’s daily operations to function. With the port closed because of the collapsed bridge, businesses that can’t perform their operations or whose operations are limited because of the closed port may be able to file claims with their own business interruption policies to help them recover from financial losses.
Contingent business interruption insurance: The impacts of business interruption span far beyond just those companies forced to pause or halt their operations due to an unforeseen event. When a company’s business is interrupted because it’s unable to get supplies it needs for its own manufacturing process, for example, because those supplies aren’t coming through the port of entry, the company may be able to rely on its contingent business interruption insurance for help.
The world relies on insurance. Insurance relies on infrastructure.
The collapse of Baltimore’s Francis Scott Key Bridge is a stark reminder of how interconnected the global economy is. It’s also a reminder of how important insurance coverage is when things go tragically and catastrophically wrong.
Without the help of insurance, the recovery process would be even longer, even more expensive, and, quite frankly, industry-crippling for those directly and indirectly feeling the impact of the bridge’s collapse. Luckily for everyone involved, the worldwide network of insurance carriers and reinsurers should be able to handle its obligations, even in this extremely large and expensive disaster.
Everyone working in the insurance industry today should be reminded of the vital role you play in keeping the world moving. We at AgentSync are proud to serve the industry as a key piece of technological infrastructure that enables insurance carriers, agencies, MGAs, MGUs, and everyone in between to do their jobs, ultimately serving the insured that rely on them.
