How will the collapse of the bridge in Baltimore affect the profits of American insurers?

Despite the expected increase in claims stemming from the Baltimore bridge collapse, the profitability of US insurers is not expected to be significantly affected, with the average loss ratio expected to remain stable at 78.8% from 2024 to 2028. according to GlobalData.

The catastrophic collapse of the Francis Scott Key Bridge in Baltimore, following a collision with the container ship Daly on March 26, marked a major event in US maritime history. The disaster is expected to increase insurance claims in various sectors, including property insurance, liability insurance and marine, aviation and transit (MAT) insurance.

Manogna Wangari, an insurance analyst at GlobalData, noted Baltimore’s importance as one of the largest ports in the US.

“The collapse of the bridge caused the government to block the port until May 2024. The collapse is expected to result in a loss of economic activity and high insurance claims from business disruptions, supply chain disruptions, potential accidental death liabilities and marine insurance claims for the local insurers and reinsurers,” Wangari said.

The firm’s insurance database shows that property and auto insurance claims are set to account for 11.9% and 14.7% of total U.S. total insurance claims in 2024, amounting to $200.7 billion and $247.7 billion, respectively. billion.

Meanwhile, Public Liability insurance and MAT claims are also expected to make up 6.6% and 1.3% of the total, amounting to $110.8 billion and $22.7 billion, respectively. The full impact of the disaster could lead to even higher actual claims for 2024 once all damages are assessed.

This incident is being billed as possibly one of the largest marine insurance payouts in history, potentially exceeding losses from the Costa Concordia disaster in 2012. The majority of these insured losses will be borne by reinsurers within International’s reinsurance pool Group of Protection and Indemnity Clubs (P&I) which are unlikely to see a significant impact on their profitability.

P&I Clubs provide ship liability insurance, including cover for personal injury and damage to the marine environment, and are prepared to face significant collective financial losses.

“In the short term, insurers may reassess risk exposure and adjust premiums to maintain profitability, which is expected to push up premium rates for MAT, liability and property,” Wangari said.

Consequently, the US general insurance industry is projected to grow from $2.4 trillion in 2024 to $3.3 trillion in 2028, at a compound annual growth rate (CAGR) of 8.9%.

“The Baltimore Bridge disaster could result in higher than expected claims for U.S. insurers and reinsurers in 2024. The incident will also highlight the importance of carrying adequate marine and liability insurance coverage, which can help the growth of these lines over the next five years,” Wangari said.

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