26 March 2024 (Lloyd's List) - THE allision of Maersk-operated boxship Dali (IMO: 9697428) with the Francis Scott Key Bridge in Baltimore this morning looks set to leave marine insurers facing the biggest claim since the $500m-$600m outlay on car carrier Felicity Ace (IMO: 9293911) two years ago.
Attempts to assess the size of a payout just hours after a major casualty inevitably have a 'back of an envelope' quality. But the replacement value of the bridge and the possible loss of life involved point to a bill running to hundreds of millions of dollars.
A claim on that scale could see the previous record for International Group pool scheme payouts, set in 2021-22, comfortably tumble.
The casualty will now be the subject of a casualty investigation, formally the responsibility of flag state Singapore.
But given the location of the incident, the National Transportation Safety Board - the US equivalent of Britain's Marine Accident Investigation Branch - is likely to step in.
The subsequent reports will contribute to legal determination of liability. If the owners are deemed liable, the bill effectively passes to their protection and indemnity insurers.
According to the IG database, Dali is entered with Britannia, a London-based marine mutual. Britannia has been approached for confirmation.
The largest element of any payout will be the value of the Francis Scott Key Bridge, which was built in 1977 at a cost of $60m at the time, equivalent to over $300m today.
However, construction inflation has far outstripped consumer price inflation over the intervening period, and the replacement cost could be substantially higher.
No deaths have yet been reported, but fears are growing for the seven people still missing.
The lives of US citizens are deemed to be worth far greater compensation than the lives of third-world seafarers. P&I clubs generally offer single-digit million dollar payouts to victims' families, preferring the certainty of a quick settlement to costly protracted litigation in the US.
Delays to other vessels are not a P&I liability, although prudent shipowners will have delay cover. P&I clubs often offer delay cover as a sideline and will find themselves on the hook for much of it.
Britannia will be responsible for the first $10m of any claim on its own account. Once the bill exceeds this layer - as is certain to be the case with Dali - it is shared among IG affiliates through the pool scheme.
In the simplest possible terms, the other 11 members will chip in pro rata for the $10m-$30m tranche, after which liability is reinsured through Bermuda-based captive vehicle Hydra.
The general excess of loss programme, known as GXL in industry jargon, kicks in at the pool ceiling of $100m. GXL, which is funded by shipowners through a levy imposed per gross tonne, provides an additional $2bn of reinsurance in a three-layer structure.
A further $1bn of reinsurance cover - known as 'the collective overspill' - is purchased by the IG to provide protection in respect of claims exceeding the upper GXL cover limit of $2.1bn.
Major marine casualties are long tail events and it is often years before the full cost can be assessed. The worst in recent years was the fire and sinking of Felicity Ace in 2022.
The total loss of the pure car and truck carrier is thought to have cost marine insurers somewhere upwards of $500m, with most of that accruing to cargo insurers.
Costa Concordia, a cruiseship that sank off Italy in 2012 with the loss of more than 30 lives, is reputed to have cost the market over $2bn. There was a similar outlay after boxship Ever Given (IMO: 9811000) blocked the Suez Canal for six days in 2021.
The highest-ever pool scheme deficit of $487m was seen in 2021-22. That fell by over 80% in 2022-23 to just $74.6m, which was heralded as unusually benign and thus a boon to the sector as a whole.
A return to the deficits of the recent pasts would be bad news for shipowners as a whole, as it would likely find reflection in increased P&I pricing at the next renewal round.
