The Dali claim showed just how resilient the re/insurance is: Gallagher Re

Dali loss has been a test for industry – but one that illustrated just how effective the risk-transfer in place for such incidents can be.

Key points:
Dali loss a test for carriers
Losses spread far and wide
Unlikely to result in hardening

“Dali is a significant marine claim, but since the incident all layers of the re/insurance industry has proven how resilient and effective the system is when called upon.” 

Since cargo ship MV Dali collided with Baltimore's Francis Scott Key Bridge on Marsh 26, 2024, the insurance industry has steadily been trying to get a handle on the loss. Perhaps inevitably, loss estimates steadily increased to the point they are now edging towards $3 billion. But the incident has also illustrated just how effective the risk-transfer in place for such incidents can be.

That is according to Matt Jenkins, senior broker, Gallagher Re, who argues that while the scale of the loss has tested the international protection and indemnity (P&I) insurance market, in fact, it has also shown the value of insurance and reinsurance.

“Dali is a significant marine claim, but since the incident all layers of the re/insurance industry has proven how resilient and effective the system is when called upon,” he told IUMI Today. 

He noted that the International Group of P&I Clubs is supported by a reinsurance programme that provides coverage up to $3.35 billion. The first $10 million of any claim is covered by the individual P&I club; losses between $10 million and $100 million are shared collectively across all member clubs in the International Group pool; reinsurance covers losses up to $2.25 billion in excess of the $100 million pool threshold; an additional $1 billion layer sits on top, taking total coverage to $3.35 billion.

Broad industry shoulders

Jenkins notes that, given the size of the limit, it requires a wide support base from both the direct market as well as the reinsurance market. “The direct market supports a large proportion of the programme, but they are supported by comprehensive treaty reinsurance programmes. In turn, many treaty reinsurance providers will also purchase their own retro protection. As such, the impact from Dali is spread across the industry,” he said.

The upside of this is that the losses are spread out between many carriers; the downside is many carriers will have experienced some loss due to the event. Yet Jenkins does not believe that the incident will have a significant bearing on sentiment in the market – and pricing or terms and conditions. This is partly because the losses have been spread out – and partly because new capacity has been entering the market in recent years.

“The renewal season ahead will be interesting as some reinsurance and retro programmes will be affected by the Dali deterioration and/or potential claims arising from the Persian Gulf conflict, particularly programmes which are purchased on a composite basis and therefore have exposure to Political Violence and Terrorism losses,” he said. 

“Whilst each treaty renewal will have its own specific dynamics and claims performance, we do not expect any sort of hardening or withdrawal of capacity from the space, especially off the back of extremely profitable results for these capacity providers in recent years.” 

“On the flip side to this, over the past few years there continues to be significant capacity growth in the direct, treaty and retro marine and energy space, and we expect this to continue into 2027.”

Judged on merit

He stresses that each deal will have its own nuances in terms of supply and demand and loss experience – and therefore on the negotiation between carriers and clients. But he stresses that most carriers are coming from a place of stability, having enjoyed several years of solid results.

“Whilst each treaty renewal will have its own specific dynamics and claims performance, we do not expect any sort of hardening or withdrawal of capacity from the space, especially off the back of extremely profitable results for these capacity providers in recent years,” Jenkins said. 

That said, he does anticipate some movement at the very top of the risk chain. “The retro market is potentially going to more consistent in some potential hardening given its exposure to Dali’s deterioration.”

He said that in some ways the Dali loss will eventually be seen as a good test for the market – and one it came through, illustrating the value of re/insurance and the fact that these specific risk structures have been set up in a way that works.

“Moving forwards shipowners should be pleased with how resilient the re/insurance market has been over the past few years post Dali. Whilst pricing naturally ebbs and flows depending on claims activity, the re/insurance market continues to show its value to the International Group through its long-term support.”

Matt Jenkins is a senior broker at Gallagher Re. He can be reached at: Matthew_Jenkins@gallagherre.com 

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