Baltimore Bridge: TD Cowen Analysis

Some insights from TD Cowen on the Baltimore bridge incident and its potential imapct on the Marine sector;

The collapse of the Francis Scott Key Bridge outside Baltimore, MD, is a sizable loss event for the P&C (re)insurance sector, with the insured loss likely rising to the highest ever in the marine market (i.e., potentially ~$1.5-$3B). We expect losses to be manageable across our
coverage, with the loss to be borne mostly by marine reinsurers, and we remain at Buy on ACGL, HIG, and TRV.Background

Early last Tuesday morning, a containership collided with the Francis Scott Key Bridge outside of Baltimore, MD, causing the bridge to collapse. In addition to fatalities and the bridge destruction, the accident has caused the Port of Baltimore, among the 20 largest in the U.S., to halt vessel traffic indefinitely.

Impact on Insurance Industry

We expect this event to end up as the largest insured loss ever in the marine market (i.e., above the ~$1.5B from the Costa Concordia sinking in 2012), with losses potentially in the $1.5 to $3B range. While news reports put the bridge’s value at $1.2B, the insured limit is not yet known. In
addition to this property damage (and any damage to the ship itself), the insured loss would likely include liability claims from business interruption due to port closure, debris removal, and wrongful death. We expect each of these buckets to have the potential to run into the
hundreds of millions of insured losses.

While claims are likely to spread across many covers and lines, our initial view is the majority of losses are likely to be subrogated to the marine insurance market, mainly P&I (third-party property damage / liability), as well as hull (physical damage to the vessel), and
cargo. That said, this will likely require a protracted court battle and take a long time to play out. In marine, this ship’s coverage was underwritten by the International Group of P&I Clubs (IG), an industry mutual organization, with the vast majority of risk (i.e., above ~$100M)
reinsured and a limit of $3.1B per vessel. IG has put the number of reinsurers in the pool at ~80 (including >20 of the top 25 global writers).
Separately, we think this event will drive a material increase in marine (re)insurance pricing.

Bottom Line

We anticipate sizable insured losses from this event in the $1.5 to $3B range (though it is still early, with a lot of unknowns). We expect the bulk of these losses to be borne by the marine insurance (P&I) providers / global reinsurers, though company-level impacts
should be manageable. We think this event will lead to higher near-term pricing for marine (re)insurance. We continue to favor ACGL among reinsurers and specialty underwriters, and HIG and TRV among commercial insurers. The impact of this event should be manageable for all three.