While the International Group of P&I Clubs’ (IG) extensive reinsurance protection is expected to alleviate much of the financial impact of the recent Baltimore bridge collapse, S&P warns of higher reinsurance costs that may occur post the event.
The recent Baltimore bridge accident, involving a collision between a cargo ship and the bridge, resulting in fatalities and substantial property damage, is likely to be one of the largest marine losses in history, potentially surpassing the Costa Concordia disaster of 2012.
The incident has highlighted the critical role of reinsurance in managing catastrophic losses within the marine sector.
Certain details about the incident remain uncertain, but expected losses are projected to include property rebuild costs for the bridge, as well as damage to the vessel and its cargo, and business interruption.
The US president has pledged immediate federal funding for the bridge’s reconstruction, which could expedite the process but introduces uncertainty regarding the extent of final insurance claims.
The vessel involved in the accident, named the Dali and insured by Grace Ocean, is registered in Singapore and is a member of the Britannia P&I Club. Britannia’s liability coverage for the Dali is capped at $10 million, with the IG collectively responsible for the next $90 million through a pooling arrangement.
AXA XL leads the IG’s $3 billion reinsurance program, which is supported by a consortium of large international reinsurers. Despite the magnitude of the incident, the marine insurance sector, backed by robust reinsurance agreements, is well-equipped to handle the claims.
AXA XL, in particular, is expected to manage its share of the costs effectively, maintaining its financial ratings and position in the market, it was stated.
Overall, the event, while significant, is considered manageable for the reinsurance sector, thanks to strong underwriting performance in recent years and ongoing favorable pricing trends projected to continue into 2024.
S&P also noted that the industry’s diversified coverage strategies and substantial reinsurance protections will play pivotal roles in sustaining its resilience against such marine disasters.
It is worth noting that fellow credit ratings agency Fitch previously forecasted a minimal impact on the earnings of individual reinsurers stemming from the collapse.
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