Francis Scott Key most

A bridge as an Intersection of Dimensions

In the world of insurance, an incident like the collision of the cargo ship Dali with the Francis Scott Key Bridge in Baltimore can have far-reaching consequences that extend well beyond the immediate damage. This event is not just about the restoration of the physical structure or the payment of compensation for losses, but also an example of how a single incident can cause a wide range of disruptions, altering the business and living environment for years to come.

Chain Effects of a Single Incident

The collapse of the Francis Scott Key Bridge in Baltimore followed when the MV Dali ship lost control and struck the southwest support of the main arch on March 26, 2024, in the early morning hours. This incident caused the immediate blockage of the Patapsco waterway, almost instantly halting nearly all passenger and cargo traffic through the Port of Baltimore. The direct consequences of the bridge collapse resulted in human casualties, although initial reports indicated that there were no people in the vehicles on the bridge at the time of the collapse. It was later discovered that members of an eight-person maintenance crew were on the bridge during the incident; four bodies were recovered, two people are missing and presumed dead, and two were rescued from the river.

Initial estimates indicated that the economic damage was around $15 million per day due to the disruption of activities in the port. At the same time, the bridge was a crucial part of Interstate 695, known as the Baltimore Beltway, and its collapse caused significant traffic disruptions, requiring traffic rerouting and additional strain on other roads and bridges in the region. The estimated annual traffic of 11.5 million vehicles, which amounts to about 31,500 vehicles per day, indicates the bridge’s importance in local and regional transportation, both for daily traffic and access to the major Port of Baltimore.

Luka Baltimor

Economic Effects

The Port of Baltimore, as one of the largest import and export hubs on the East Coast of the U.S., handled over 52.3 million tons of foreign cargo in 2023, valued at around $80 billion. This port has also been the leading port for cars and light trucks for 13 consecutive years, processing about 850,000 vehicles. Therefore, the impact of the incident on economic activity in the port affects both national and global supply chains. Companies that rely on the swift and efficient distribution of goods through the port and across the Baltimore bridge are facing potential revenue losses and disruptions in supply chains that will spread.

Local Effects

Transport and Logistics: Baltimore is a key logistics and distribution center, and the Francis Scott Key Bridge is an important traffic artery. Its closure directly impacts transport companies such as Amazon, FedEx, and UPS, which use this route for quick deliveries.

Industry and Manufacturing: Companies that rely on raw materials or components passing through Baltimore may experience production delays and increased costs due to the need for alternative transportation routes.

National and Global Impact

Car Industry: Baltimore is a key point for the import and distribution of cars and light trucks in the U.S. Delays can affect national availability of new vehicles and potentially drive up prices.

Global Trade: As one of the largest ports on the East Coast, the Port of Baltimore handles significant volumes of import and export cargo. Disruption of activities at the port will impact international trade and logistics, especially for goods such as cars, sugar, gypsum, and coffee, affecting prices and availability of products worldwide.

In addition to economic and business consequences, the bridge closure also affects the local population, who face longer commutes and increased costs, which can negatively impact quality of life and access to services.

Implications on the Insurance Industry

Statements from leading analysts, insurance companies, and reinsurers about the Francis Scott Key Bridge incident in Baltimore, reveal that the financial consequences are significant, and the insurance sector is preparing for challenging damage assessment and compensation processes.

S&P Global estimates that total losses could reach $3 billion. It is expected that insurers and reinsurers will be able to manage these losses without major impacts on their ratings, thanks to strong performances in previous years​ (Insurance Journal)​.

AXA XL is cited as the leading reinsurer in the first layer of the reinsurance program of the International Group of P&I Clubs, indicating their central role in covering the damages (gCaptain)​.

Britannia P&I, a member of the International Group of P&I Clubs, confirmed that the MV Dali was insured with them and that they are actively working with the ship's management and relevant authorities and regulators to clarify the facts and professionally resolve the situation (gCaptain)​.

Chubb Ltd has been identified as the leading insurer for the bridge's property policy (Benzinga, Insurance Journal)​.

These estimates and statements suggest that the economic burdens of the incident will be distributed among many participants in the insurance sector, which should mitigate the individual financial impact on each of them. The total damage is still subject to clarification, but it is clear that the payout processes and the accompanying legal discussions will be complex and potentially lengthy. The state of Maryland has coverage for property and business interruption up to $350 million, with a $50 million deductible. Additional excess policies cover various liabilities, including general and property liability. Despite the large amounts, it is expected that the insurance industry will manage these losses without major disruptions, thanks to strong results and favorable pricing in recent years.

Complex Picture, Long-term Insights, and Possible Outcomes

The complexity of insurance damage claims increases due to the involvement of multiple types of policies and various insurance companies. This includes marine insurance, liability insurance, property insurance, and business interruption insurance. Coordination among insurance companies and the legal aspects accompanying each policy can be a lengthy process, especially considering the amounts involved and the complexity of the situation.

This incident clearly identifies the importance of a comprehensive approach to risk management and insurance. It also highlights the need for quality preparation and the development of risk management strategies, as well as adequate insurance that can cushion the impact of extreme events on infrastructure and society. Additionally, it demonstrates the importance of integrating different levels of government and the private sector in resolving crisis situations, with the necessary transparency and accountability in the process of recovery and compensation.

Some strategies for managing such complex challenges include:

  1. Proactive planning and flexibility: Companies, as well as the public sector, should develop plans for emergency situations that include alternatives for critical infrastructure elements such as bridges. Additionally, flexibility in supply chains and the ability to quickly redirect resources also play an important role in minimizing disruptions.
  2. Insurance diversification: Investing in various types of insurance can help cover different risks that arise from such complex events. For example, in addition to standard property insurance, this incident clearly highlights the need to consider business interruption insurance, which can cover revenue losses during the disruption caused by the incident.
  3. Technological support: Utilizing advanced technology and analytics can help companies and insurers better prepare, respond more quickly to incidents, assess damage, and manage damage claims more efficiently.
  4. Collaboration with the public sector and government: Coordination between the private sector and insurance with government agencies is a necessary element for managing such complex crisis situations. Maintaining regular dialogue and awareness of the broader community consequences that affect all stakeholders can help expedite legal issues and integrate insurance as a risk management model.

Although the challenges arising from such catastrophes are enormous, through thorough risk identification, proper planning, adequate insurance, and effective collaboration, it is possible to mitigate their negative impact and ensure faster recovery. Additionally, in such situations, the insurance industry can demonstrate its role in the stability and recovery of society, providing not only financial support but also expert leadership in overcoming crises, based on accumulated experience and expert insights into risks, consequences, and their quantification.