A journalist once said, in 1859, that “not a breeze can blow in any latitude” without being recorded on the books of Lloyd’s of London, the oldest insurance exchange in the world, as reported by Business Insider.
With the collapse of the container ship Dali on the Francis Scott Key Bridge in Baltimore on Tuesday, insurers are duly updating those books as a picture of the true cost of the damage emerges.
Barclays analysts estimate that insurance claims from the bridge itself could total $1.2 billion, with up to $700 million in wrongful death claims, plus additional costs from business interruptions related to its closure port and the reconstruction of the bridge, Bloomberg reported.
15 million dollars a day at the bottom of the sea
Economists told Business Insider that the port closure itself would cost $15 million a day in lost economic activity, with other disruptions pushing the total to tens of millions a day.
Baltimore is a key import and export point for cars, construction and farm equipment and coal – much of which is on hold while salvage crews clear the shipping lane.
In total, Barclays said insurers could be looking at $3 billion in claims as a result of the collapse, Bloomberg reported.
“While the incident still needs to be investigated, we believe it has the potential to become a significant insurance claim, particularly in the shipping market,” the analysts wrote.
Morningstar managing director of global insurance ratings Marcos Alvarez put the amount between $2 billion and $4 billion, “depending on the length of the blockade and the nature of the business interruption coverage for the Port of Baltimore,” according to Reuters.
Lloyd’s historic room
As it happens, the primary insurer and major reinsurers for the Dali are underwriters with Lloyd’s, in whose historical “room” the financial price of this disaster will be calculated.
It was in a London coffee shop owned by Edward Lloyd in the late 17th century that ship captains and businessmen met to work out the first insurance policies, and the shop soon evolved into a market where the risks of maritime trade could be spread over many businesses.
While cargo owners are responsible for insuring their property on board, the shipping industry covers the protection of the ship itself and the damage it causes to third parties.
The vast majority of shipping is covered by “protection and indemnity clubs,” groups of shipping companies that pool liabilities together so that an extreme loss doesn’t put a member out of business.
These clubs, in turn, have insurance and reinsurance policies in which losses above certain limits are protected by multiple companies, further spreading the risk.
Dali is a vessel in the Britannia P&I Club, the oldest such insurance group in the world.
Today, Lloyd’s says its companies insure risks representing more than $58 billion in premiums annually, covering everything from ships to satellites.
With experience from the Titanic
Room is no stranger to tragedy or complexity: its insurers have settled claims from the sinking of the Titanic to the 9/11 attacks and everything in between.
But the Key Bridge collapse could result in “one of the largest claims ever to hit the marine (re)insurance market,” John Miklus, president of the Marine Insurers Institute of America, told Insurance Business.
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