- The Francis Scott Key Bridge in Baltimore collapsed after a container ship collided with it.
- Several entities could be on the hook to foot the bill in the aftermath of the disaster.
- The maritime insurance industry will likely be saddled with the highest costs.
The Francis Scott Key Bridge in Baltimore collapsed on Tuesday after a large container ship ran into it, leading to six presumed deaths and millions of dollars in possible damage.
It's still too early to estimate the total economic impact of the disaster, but between the cost of rebuilding the decades-old bridge, compensating the victims' families, and paying out damages for disruptions to the supply chain, the eventual cost of the disaster is expected to be significant.
Who will pay to rebuild the bridge?
President Joe Biden said on Tuesday the federal government should be responsible for paying to reconstruct the damaged Francis Scott Key Bridge.
"It is my intention that the federal government will pay for the entire cost of reconstructing that bridge, and I expect Congress to support my effort," Biden said.
The bridge was built in the 1970s for about $60 million, but the cost of rebuilding it could be 10 times its original price tag, an engineering expert told Sky News.
Baltimore is among the busiest ports in the nation, with more than a million shipping containers passing through each year. The collapse — which closed the port to all maritime and most road traffic until further notice — is already beginning to wreak havoc on the supply chain.
The cost of building the bridge back fast enough to offset diversions as much as possible could saddle the government with a more than $600 million bill, David MacKenzie, the chair of the engineering and architecture consultancy COWIfonden, told Sky News.
Who will pay for damages to the ship and its cargo?
The container ship, the Dali, is owned by a Singapore-based firm. The ship's charterer, Maersk, confirmed to Business Insider that vessel company Synergy Group operates the ship.
However, the companies with cargo aboard the Dali could ultimately be responsible for some of the ship's damages and cargo costs, according to Ryan Petersen, the CEO of the supply-chain-logistics company Flexport, which had two containers on the ship.
The Dali was carrying 330 containers that must now be rerouted, Petersen said in an X thread.
An ancient maritime law known as "general average" dictates that companies with even a single container aboard a ship split certain damages pro rata based on the number of containers they had on board, ensuring all the stakeholders benefiting from the voyage are splitting the risk, Petersen said.
General average situations can occur when a ship is stranded or when cargo is damaged or thrown overboard to save the vessel, according to Flexport. The concept helps ensure that all parties who have a vested interest in the vessel share the cost and concern of protecting it.
It's too soon to know whether damages incurred to free the Dali in the coming days will qualify as a case of general average.
Who will pay for everything else?
The majority of the financial fallout is likely to lay primarily with the insurance industry, according to media reports.
Industry experts told the Financial Times that insurers could pay out losses for bridge damage, port disruption, and any loss of life.
The collapse could drive "one of the largest claims ever to hit the marine (re)insurance market," John Miklus, the president of the American Institute of Marine Underwriters, told Insurance Business.
He told the outlet that the loss of revenue from tolls while the bridge is being rebuilt will be expensive, as will any liability claims from deaths or injuries.
The Dali is covered by the Britannia Steam Ship Insurance Association Ltd., known as Britannia P&I Club, according to S&P Global Market Intelligence.
In a statement to Business Insider, Britannia said it was "working closely with the ship manager and relevant authorities to establish the facts and to help ensure that this situation is dealt with quickly and professionally."
Britannia is one of 12 mutual insurers included in the International Group of P&I Clubs, which maintains more than $3 billion of reinsurance cover, sources familiar with the matter told Insurance Business.
Britannia itself is liable for the first $10 million in damages, both FT and Insurance Business reported. Whatever remains is dealt with by the wider mutual insurance group and Lloyd's of London, a reinsurance market in the UK, the FT reported.
Update: March 28, 2024 — This story has been updated to include additional information about general average and clarify that it is too soon to know whether general average will apply in the case of the Dali.
