A month later, insurance may be sector most affected by Key Bridge collapse

Immediately after Baltimore’s Francis Scott Key Bridge collapsed there were warnings of dire impacts to the U.S economy. After all, the city’s port, which would be essentially closed for weeks and perhaps months while the bridge is rebuilt, handles a record 52.3 million tons of international cargo a year, worth about $80.8 billion. It supports more than 15,000 direct jobs and more than 139,000 indirect jobs connected to the port, generating almost $3.3 billion in total personal income. The port handles more cars – 750,000 vehicles a year - and more farm equipment than any other port in the country. It ranks ninth among U.S. harbors for both tonnage and dollar value of foreign cargo passing through.

“The collapse of the Key Bridge is a global crisis," said Maryland Gov. Wes Moore. "The national economy and the world's economy depends on the Port of Baltimore.”
Moore said the bridge collapse is impacting the farmer in Kentucky, the auto dealer in Ohio, the restaurants in Louisiana and in Tennessee.

“This is impacting the entire country," he said.

Economic impact diminishing

But now almost exactly a month after the collapse, economists and analysts say the economic effects will largely be absorbed and generally diminished within another month.

Researchers at Johns Hopkins University said they do not anticipate a strong negative impact on the national economy beyond supply bottlenecks, which may result in delays and higher shipping costs for certain commodities (coal, sugar and gypsum) and autos.

Just as the nation’s supply chains were recovering post-pandemic, the Key Bridge collapse will undoubtedly revive some shortages and slow order fulfillments.

The White House said hundreds of vessels headed to Baltimore are being diverted to other East Coast ports. The Supply Chain Disruptions Task Force collaborated with the Norfolk Southern Railway Company to create an additional rail service between the Ports of New York, New Jersey and Baltimore to help get cargo meant for Baltimore back to the port so it can be processed and stored correctly.

Variety of insurance impacts

There will be some high insurance claims from business interruptions, supply chain disruptions, potential liabilities for accidental deaths, and marine insurance for local insurers and reinsurers, experts say.

Insurance, in fact, may be the sector most dynamically affected.

The incident is expected to lead to the biggest marine insurance payout and is expected to cost insurers billions of dollars in losses, according to according to GlobalData, a leading data and analytics company. The losses linked to the Key Bridge collapse is expected to surpass the marine losses of the Costa Concordia cruise ship disaster in 2012.

The accident will result in the most significant maritime loss in US history in terms of business interruptions and logistics scrambles, insurers will witness higher claims in 2024 across general insurance lines such as property, liability, and marine, aviation, and transit (MAT) insurance, GlobalData said.

Profits unlikely to be affected

“However, the incident is unlikely to have a significant impact on the overall profitability of US insurers, as the average loss ratio of general insurance is expected to remain at 78.8% over 2024–28,” the analysis concluded.

According to GlobalData’s Global Insurance Database, property and motor insurance claims are expected to account for 11.9% and 14.7% share of the total general insurance claims in the U.S. in 2024, amounting to $200.7 billion and $247.7 billion, respectively. Additionally, liability and marine, aviation, and transit (MAT) insurance claims are expected to account for a 6.6% and 1.3% share, amounting to $110.8 billion and $22.7 billion, respectively. However, with this event, the actual claims in 2024 might increase once the complete impact of the damage is realized.

Reinsurers within the reinsurance pool of the International Group or Protection and Indemnity will bear most of the insured losses resulting from this disaster, GlobalData said. The profitability of individual reinsurers is not expected to be impacted. P&I clubs, which offer liability insurance for ships together with personal injury and marine environmental damage coverage, are likely to face a significant collective loss.

“In the short term, insurers may re-evaluate risk exposure and adjust premiums to maintain profitability, which is expected to increase the premium rates for MAT, liability and property insurance policies,” said Mangan Vangari, insurance analyst at GlobalData. “The incident could translate into higher claims than anticipated for US insurers and reinsurers in 2024. It will also highlight the importance of taking sufficient marine and liability insurance coverage, which could support the growth of these lines over the next five years.”

The US general insurance industry is expected to grow from $2.4 trillion in 2024, to $3.3 trillion in 2028, in terms of gross written premiums, GlobalData said.

For consumers, the bridge collapse is likely to add to the already spiraling auto insurance rates and perhaps repair costs and new car orders.

‘The bridge collapse is hitting the auto and fuel supply chain hard,” said Joel Pepera, director of telematics at auto insurance data company Arity “When repair costs go up for drivers, auto insurance rates need to rise as well.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.