The tragic collapse of Baltimore’s Francis Scott Key Bridge in the United States after it was hit by a container ship has raised questions about the safety of commercial shipping, as well as its implications for supply chains and the insurance industry.

Captain Rahul Khanna, Global Head of Marine Risk Consulting at Allianz Commercial offers an in-depth look into the Baltimore bridge collapse.

How often do events, such as ships hitting bridges and other port infrastructure, occur?

According to Khanna, such incidents of this magnitude are rare.

A study indicates that between 1960 and 2015, there were just 35 major bridge collapses worldwide involving incidents with ships or barges with a total loss of life of 342 people.

It is important to note that the majority of accidents involving vessels and bridges cause damage that varies from minor to significant but does not necessarily result in collapse of the structure or loss of life.

Allianz’s annual Safety & Shipping Review shows there were close to 2,000 reported incidents of vessels hitting port infrastructure between 2013 and 2022.

This makes it the fourth most frequent cause of more than 27,000 shipping incidents reported during this period but accounting for just 7% of all incidents.

After this tragedy, how safe would you say commercial shipping is?

According to Khanna, the shipping industry has made major improvements when it comes to maritime safety over the past decade.

Thirty years ago, the global fleet was losing over 200 vessels a year. By the end of 2022, less than 40 losses were reported.

Annual shipping losses have declined by 65% over the past decade, reflecting the positive effect of an increased focus on safety measures over time.

Collision incidents with other vessels and contact with port infrastructure are rare. Over the past decade there have been just 30 total losses from collisions with other vessels and just four incidents with port infrastructure.

Collectively these account for just 4% of the total number of vessels lost overall, 807 reported between 2013 and end of 2022.

The number of shipping incidents reported around the world overall every year has remained consistent, there were 3,032 during 2022 and to 3,000 in 2021.

Container ships have grown significantly in recent decades. What impact is this having on safety?

According to Khanna, the size of container ships have gotten bigger as owners have looked to reduce costs, lower emissions, and maximize capacity.

Container ship capacity has grown in size by around 1,500% in the last 50 years but the Dali is not anywhere near as large as the biggest vessels now hauling goods around the world.

For example, the Ever Given, which blocked the Suez Canal for a week in March 2021, can carry more than 20,000 containers if full.

The Dali can carry around 10,000 although it was carrying less than half this amount when it hit the bridge.

Larger ships are not resulting in a higher frequency of accidents but when something does go wrong, the scale of the damage is likely to be much more severe because of their size and the fact that surrounding civil infrastructure did not anticipate of that are so big.

What are some of the typical risks associated with larger vessels?

While the number of serious shipping accidents worldwide has declined over the long-term, incidents involving large vessels are resulting in disproportionately high losses from events such as:

– fires

– container and carrier losses

– hazardous cargo

– more complex salvage operations

– expensive repair costs

– issues with ports of refuge.

Khanna said that across the industry, there are ongoing discussions about whether infrastructure and regulation have kept pace with increasing vessel sizes.

What are some of the potential implications of this incident for supply chains and the insurance industry?

At this stage it is still too early to tell with any certainty, according to Khanna.

The collapse of the bridge led to the suspension of vessel traffic at the Port of Baltimore, which is one of the largest US ports

It serves as the key discharge port for cars and trucks arriving from factories in Europe and Asia plus it is also a significant embarkation point for exports of American coal.

Khanna said that many of those goods could be delayed in reaching their ultimate destinations, forcing shippers to make alternative plans, and limiting inventory.

The bridge collapse also highlights the growing challenges for businesses involved in global supply chains and their interconnectivity.

Many are dealing with the loss of access to the Suez Canal due to the Houthi attacks on merchant shipping that have following the war in Gaza, and longer waiting times at the Panama Canal due to a prolonged drought that has impeded operations.

About 90% of international trade is transported across oceans, so in an age of interconnection problems in one spot can quickly be felt more widely.

Assessing the impact and final cost of such a complex loss event in its immediate aftermath would just be speculation.

Outside of the implications from any tragic loss of life, however, insured losses could include a wide range of claims such as:

– property damage

– business interruption from the port closure

– debris removal

– cargo loss and clean-up

– damage to the vessel

Initially, it is expected that most claims will be directed towards the marine insurance market, particularly Protection & Indemnity (P&I) insurance.

P&I covers third-party property damage and liability, as well as hull insurance for physical damage to the vessel, and cargo insurance claims.

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