Baltimore bridge one month on – what we know so far

On 26th March 2024, the container ship MV Dali crashed into the Francis Scott Key Bridge which spans the Patapsco River near Baltimore. Within seconds, the bridge was largely destroyed, blocking the entrance to the Port of Baltimore. Six construction workers who were conducting overnight repairs to the bridge when it was struck, are presumed dead. 

A month on from the disaster, the total cost of this loss remains unclear, including how much will be covered by the Lloyd’s market. Whilst there is still a lot of speculation surrounding the event and it will likely take several years before we know the full impact and where the liability eventually lies. In the meantime, we wanted to draw together some of the recent developments. 

The Key Bridge is a vital traffic route for Baltimore and was used by approximately 30,000 to 34,000 vehicles per day and accounts for about 8% of the Maryland Transportation Authorities’ toll revenue, according to the New York Times and the Baltimore Banner. The Port of Baltimore is one of the busiest in the US with approximately 1,800 discrete calls per year. During those visits, vessels pass the Key Bridge circa 3,600 times, according to a recent court filing. An article in the New York Times mentioned that 570,000 cars were imported into the US through the port in 2023. 

MV Dali is a 985-foot-long Neopanamax container ship built in 2015 and owned by Singapore-based Grace Ocean and managed by Synergy Marine. The ship was bound for Colombo, Sri Lanka, under charter from Maersk with a crew of 22 and two pilots on board. According to MarineTraffic and newspaper reports, the cargo consisted of 4,679 shipping containers.  

The vessel suffered from a total power outage shortly after departure from the port that left it drifting in the water and the crew were unable to steer the ship when it collided with the bridge. Initial reports pointed to contaminated fuel, but this has later proven to be incorrect. What caused the power outage and when is being disputed and will be a key factor in determining where the liability ultimately falls. 

Initially, it was expected that the majority of claims would be directed towards the marine insurance market, particularly Protection & Indemnity (P&I) insurance, which covers third-party property damage and liability, as well as hull insurance for physical damage to the vessel, and cargo insurance. The resolution of these claims is likely to involve extensive legal proceedings. 

The Dali is insured by the Britannia P&I Club, one of the members of the International Group of P&I Clubs. The group’s reinsurance programme is led by Axa XL with up to $3.1bn ground-up cover per vessel. The total value of the bridge is estimated to be around $1.2bn but it is not clear on the rebuild cost of the destroyed portion of the bridge. Discussions with a marine underwriter suggested that one point of contention would be betterment (where the reconstruction of the bridge would be done to a newer or better standard than before the loss in which case insurers are not liable for the whole cost). President Biden had initially stated that the Federal Government would provide funds for the rebuild but later added that they would pursue damages from “responsible parties’, according to Politico. 

On 1st April, Grace Ocean and Synergy Marine filed a Petition for Exoneration from Limitation or Liability under the Limitation of Liability Act of 1851. The details of this Act are very complex in maritime law. However, if successful the effect would be to reduce significantly any potential claim to the value of the vessel and its income for the journey. Estimates suggest that this would limit any potential claim to c$44m, a very small proportion of the overall financial loss. We believe it is very unlikely that this will be upheld.  

The most recent speculation suggests that the vessel suffered technical issues prior to departure and alerts to the crew were ignored. It is alleged that both Grace Ocean and Synergy Marine had failed to train properly and supervise the crew, failed to follow safe work and operational procedures, and failed to maintain properly, equip and inspect the vessel. We understand that a possible criminal investigation is also being undertaken by the FBI. If it is proven that the accident was a result of carelessness and negligence by the crew, the Limitation of Liability Act would be overruled and the claim would far exceed the $44m cap. 

If Limitation does not apply, the loss could compare to that of the Costa Concordia claim in 2012 which reached into the upper layers of the International Group’s $3.1bn reinsurance tower. The reinsurance programme is spread across multiple carriers, both within and outside of Lloyd’s. This is reported to include more than 80 reinsurers, including over 20 of the top 25 involved in the reinsurance pool.  According to Fitch Ratings, the event is anticipated to have a limited impact on individual reinsurer earnings and, therefore, is unlikely to affect the ratings for global reinsurers. 

Lloyd’s CEO John Neal commented in the press that the impact on Lloyd’s would not be ‘outside of the normal levels of expectations of what we should see in a given year’. Axa reported that is ‘does not expect losses from the Francis Scott Key bridge collapse to be material at group level’. Chubb, believed to be the lead insurer on the property placement for the bridge, reported that the loss was ‘a tragedy’ but that their exposure was ‘within what we would contemplate’. Munich Re reported in its Q1 preliminary results that it ‘looks to have a light exposure’. No other global insurers have made comments on their exposures to date but with the loss spread across such a large number of carriers, it is unlikely to have a significant impact on any single entity.  

The clearest near-term impact is likely to be on the International Group’s cost of reinsurance which, according to S&P Global Ratings, is likely to increase. The claim also impacts the marine hull and cargo classes, given some damage to the vessel and the cargo onboard. Both classes have experienced small rate increases over recent months despite rates having been expected to soften during 2024. The event could help hold rate the small rate increases for a little longer. 

We reported at our recent Alpha meeting that some of our syndicates will have exposure to this loss, whilst many will not. Of those syndicates with exposure, no one syndicate is reporting this as a ‘capital’ event. It is a large loss for which our syndicates plan in any given year. We reported at Trinity House that the event could cost our members up to 2% of their underwriting. 

The accident has highlighted deficiencies in the protection of bridges in the case of such accidents. The Key Bridge’s pillars were not sufficiently protected and a recent article in the New York Times highlighted that this is a widespread problem in the US. The paper identified another 198 bridges either without sufficient protection or at least with inadequate protection. Even bridges that are protected by fenders or island barriers might not be able to cope with ever increasing ship sizes. 

It will be interesting to watch how this loss plays out.