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Baltimore disaster may mean largest marine insurance payout ever: Lloyd's

by SuperiorInvest

The Baltimore City Fire Boat 2 floats next to the container ship Dali after it collided with the collapsing Francis Scott Key Bridge into the Patapsco River in Baltimore, Maryland, U.S., Tuesday, March 26, 2024.

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The collapse of a major Baltimore bridge and its fallout could result in the largest payout ever recorded in marine insurance, the chairman of insurance giant Lloyd's of London said Thursday.

Analysts have predicted insured losses from the disaster would be in the single-digit billions after a massive freighter crashed into the Francis Scott Key Bridge on Tuesday. Six people are presumed dead.

“We are starting to deploy resources in anticipation of this being a very substantial claim for the industry. And for the Lloyd's market, it will take some time for the complexity of the situation to unravel,” Bruce Carnegie-Brown told CNBC. “Squawk Box Europe”.

“So, [it’s] Too early to call a number. At this time I do not anticipate it being outside of our realistic disaster scenario planning. “It feels like a very substantial loss, potentially the largest marine insured loss ever experienced, but not outside the parameters we planned.”

Carnegie-Brown added that while there would clearly be claims for the ship, cargo and bridge, it is the “second-order impacts” that would become “substantial.”

“Many businesses will be disrupted, supply chains will be disrupted by ships that are stuck inside the port and, of course, ships that were trying to access the port and can no longer, and those second orders. The effects will take some time to resolved,” he said.

Baltimore is the 11th largest port in the U.S. and the country's busiest for the import and export of cars and light trucks. Supply chain operators are scrambling to minimize the impact on trade.

Analysts at Morningstar DBRS said in a note Wednesday that insured losses could total between $2 billion and $4 billion, depending on how long the port is blocked. This figure would exceed the current highest amount, which was paid for the sinking of the Costa Concordia cruise ship in 2012.

Various marine and hull liability, property, cargo and business interruption insurance policies are likely to be activated.

“Despite the large insured losses, we expect them to remain manageable for the insurance industry as they will involve a large, diversified group of well-capitalized insurers and reinsurers,” Morningstar said.

Barclays puts potential insurance claims at between $1 billion and $3 billion.

The Singapore-flagged container ship was chartered by the Danish shipping giant. Maersk and carried its customers' cargo, but was operated by the charter ship company Synergy Group. Early reports suggest the ship lost power before hitting the bridge.

Authorities in both Singapore and the United States will carry out investigations to establish legal responsibility, as part of a complex process that could take months or years.

Maersk will have had liability coverage as the charterer, rather than the operator of the vessel, David Osler, senior shipping and commodities analyst at Lloyd's List Intelligence, told CNBC earlier this week.

Impact of cars

Several global auto firms have said they are assessing the impact of the tragedy on their operations and expect to have to divert trade, thus extending some delivery times. Many say they don't expect major disruptions at this time.

Analysts at Barclays said in a note Wednesday that German automakers BMW, Mercedes and Volkswagen are the most exposed, with European imports accounting for 40% to 50% of U.S. sales in recent years.

BMW told CNBC that the incident would not affect the supply of materials to its US plant and that the company was in contact with its logistics partner regarding imports. Volkswagen said its port operations were located on the coastal side of the bridge and would not be affected, but noted it could face delays in truck transportation. Mercedes noted that other ports of entry, such as Brunswick, Georgia, would help alleviate import pressures.

Mercedes-Benz USA CEO: Too Early to See Effects of Baltimore Bridge Collapse on Business

“While there will be short-term disruptions to automotive imports and exports, I am confident that Customs and Border Protection, regional ports and terminal operators will work closely with the automotive industry to identify optimal shipping alternatives until the Port of Baltimore resume vessel operations,” Mitch Merriam, vice president of border and maritime security at K2 Security Screening, told CNBC via email.

“The Port of Baltimore is going to suffer in the short term, but plans are already underway to divert and accommodate additional traffic at other East Coast ports, including Philadelphia, Norfolk, Savannah and Charleston. All of them can handle cars and trucks light.”

The port handles a wide range of products, including sugar and gypsum, and is used by retailers such as Home Depot, Ikea and Amazon.

— CNBC's Ganesh Rao and Lori Ann LaRocco contributed to this story.

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