Baltimore City Fire Boat 2 sails past the container ship Dali after it struck the Francis Scott Key Bridge, which collapsed into the Patapsco River in Baltimore, Maryland, U.S., Tuesday, March 26, 2024.
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“We are beginning to deploy resources in anticipation of this being a very significant request for the industry.” And for the Lloyd’s market, it will take some time for the complexities of the situation to unfold,” Bruce Carnegie-Brown told CNBC’s “Squawk Box Europe.”
“So [it’s] too early to call a number. At this stage, I don’t expect it to be beyond our realistic disaster scenario planning. It feels like a very significant loss, potentially the largest ever marine insured loss, but not outside the parameters we plan for.”
Lloyd’s is one of the world’s largest reinsurers – businesses that provide financial protection to insurers who cannot cope with the scale of losses incurred.
Carnegie-Brown added that while there would obviously be claims on the ship, cargo and bridge, “second-order impacts” would become “significant”.
“A lot of business is going to be disrupted, supply chains are going to be disrupted by ships that are trapped inside the port and of course ships that have been trying to access the port that can’t anymore and those on the second tier the effects will take some time to wear off,” he said.
Baltimore is the 11th largest port in the US and the nation’s busiest for importing and exporting cars and light trucks. Supply chain operators are scrambling to minimize the impact on trade.
Morningstar DBRS analysts said in a note Wednesday that insured losses could be between $2 billion and $4 billion, depending on the length of time the port is blocked. Such a figure would surpass the current highest amount, which was paid out from the capsize of the Costa Concordia cruise ship in 2012.
Various insurance policies are likely to be triggered for marine liability and hull, property, cargo and business interruption.
“Despite the large underwriting losses, we expect them to remain manageable for the insurance industry as they will include a large and diversified pool of well-capitalized insurers and reinsurers,” Morningstar said.
Barclays puts the potential insurance claims at between $1 billion and $3 billion.
The Singapore-flagged container ship was chartered by Danish shipping giant Maersk and carried its customers’ cargo, but was operated by charter shipping company Synergy Group. Initial reports indicated that the ship lost power before hitting the bridge.
Investigations will be carried out by authorities in both Singapore and the US to establish legal liability, as part of a complex process that could take months or years.
Maersk will have liability coverage as the charterer rather than the operator of the vessel, David Osler, chief shipping and commodity analyst at Lloyd’s List Intelligence, told CNBC earlier this week.
Several global auto firms said they were assessing the impact of the tragedy on their operations and expected to have to redirect trade, thereby extending some delivery times. Many say they don’t expect much disruption right now.
Barclays analysts said in a note on Wednesday that German carmakers BMW, Mercedes and Volkswagen are most at risk, as European imports have accounted for 40% to 50% of US sales in recent years.
BMW told CNBC that the incident will not affect material supplies to its US plant and that the company is in contact with its logistics partner about imports. Volkswagen said its port operations are located on the coastal side of the bridge and would not be affected, but noted it could experience trucking delays. Mercedes noted that other ports of entry, such as Brunswick, Ga., will help ease the pressure on imports.
“While there will be short-term disruptions to auto imports and exports, I am confident that Customs and Border Protection, regional ports and terminal operators will work closely with the auto industry to identify optimal shipping alternatives while the port of Baltimore has resumed shipping 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 of them can handle 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 and CNBC Lori Ann LaRocco contributed to this story.