Baltimore disaster may be largest ever marine insurance payout: Lloyd’s

The collapse of a major Baltimore bridge and its aftermath could result in the largest marine insurance payout on record, the president of insurance giant Lloyd’s of London said Thursday.

Analysts are forecasting insured losses from the disaster to be in the single-digit billions after a massive cargo ship crashed into the Francis Scott Key Bridge on Tuesday. Six people are presumed dead.

“We are starting to deploy resources in anticipation that this will be a very significant claim for the industry. And for the Lloyd’s market, it will be some time before the complexity of the situation dissipates “Bruce Carnegie-Brown told CNBC. “Squawk Europe box”.

“So it’s very early to call a number. At this point, I don’t foresee this deviating from our realistic disaster scenario planning. This looks like a very significant loss, potentially the largest maritime insured loss ever , but it doesn’t. outside of the parameters we expect.

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

“A lot of activities are going to be interrupted, supply chains are going to be interrupted by ships that are both stuck inside the port and of course, by ships that were trying to access the port that cannot. more, and by those of second order. It will take some time for the effects to be felt,” he said.

Baltimore is the 11th largest port in the United States and the nation’s busiest for importing and exporting automobiles and light trucks. Supply chain operators are working to minimize the impact on trade.

Morningstar DBRS analysts said in a note published Wednesday that insured losses could total between $2 billion and $4 billion, depending on how long the port is blocked. Such an amount would exceed the highest amount currently paid during the capsizing of the Costa Concordia cruise ship in 2012.

Various insurance policies are likely to be triggered in relation to marine liability and loss of hull, property, cargo and business.

“Despite the large insured losses, we believe they will remain manageable for the insurance industry because they will involve a large and diverse pool of well-capitalized insurers and reinsurers,” Morningstar said.

Barclays estimates potential 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 it was operated by the charter company Synergy Group. Initial reports suggest the ship lost power before hitting the bridge.

Investigations will be carried out by authorities in Singapore and the United States to establish legal responsibility, in a complex process that could take months or even years.

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

Several global automakers said they were assessing the impact of the tragedy on their operations and expected to have to reroute trade, extending some delivery times. Many say they don’t expect major disruptions at this time.

Barclays analysts said in a note Wednesday that German automakers BMW, Mercedes and Volkswagen are 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 impact the supply of materials to its U.S. factory and that the company was in contact with its logistics partner regarding imports. Volkswagen said its port operations were located on the maritime side of the bridge and would not be affected, but noted it could face trucking delays. Mercedes noted that other ports of entry, such as Brunswick, Georgia, would help ease import pressures.

“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 resumes maritime operations. ” Mitch Merriam, vice president of border and maritime security at K2 Security Screening, told CNBC via email.

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

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

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