7 ms·

I have wondered what the insurance structure for this is and how liable the vessel's owners and insurers are for damage to public infrastructure. Marine insura

by altacc 3y ago

I have wondered what the insurance structure for this is and how liable the vessel's owners and insurers are for damage to public infrastructure. Marine insurance is one of the oldest types of insurance and antique in some respects, with large vessels covered by several underwriting firms. So potentially this is a massive financial hit for multiple companies if there is not a limit on liability.

baq 3y ago
It's worse (as in, more complex; better for the public, I guess) in that damages will be so big reinsurers are going to take a huge hit; they're probably not used to that.
- Elkekec 3y ago
  The exposure of insurance and reinsurance depends on the amount the ship was insured for (and there is a limit to that).
- mschuster91 3y ago
  > damages will be so big reinsurers are going to take a huge hit; they're probably not used to that. Nah, the re-insurances actually are used to big hits. Munich Re, one of the biggest in the world if not the biggest, pays out billions of dollars a year from nature disasters [1]. [1] https://de.statista.com/statistik/daten/studie/200297/umfrage/schaeden-aus-naturkatastrophen-der-munich-re-rueckversicherung-seit-2006/ https://de.statista.com/statistik/daten/studie/200297/umfrag...
clem 3y ago
It's certainly been a massive financial hit to the greater Baltimore area, so that sounds appropriate. Insurance companies need to account for large shocks -- it's the whole reason their industry exists.
jcarrano 3y ago
There are insurance companies that insure insurers. At each lever there are solvency requirements.
- nashashmi 3y ago
  Right. Base damage is covered by the first line insurer. The excess damage is covered by the backend insurer. Business is about managing loss. Nothing more. No further emotional support required.
  - proteal 3y ago
    What you are describing is true, but there is a lot of nuance to how reinsurance plays out in large insurance policy towers. If you build a stack of insurance policies that work together to create a large single policy limit, you typically won't see reinsurance directly in that tower. If "Westchester Insurance Company" is anywhere on that tower as a carrier (whether first line, known more commonly as a primary insurer, or above that as an excess carrier), they will cut your check in the event of a claim. The money will come from their bank account, as will all the other affected carriers in claim. They are what you would consider a traditional insurance company. With that being said, Westchester may elect to purchase reinsurance to further reduce their risk. If they know the volatility of a policy is high or want to limit their potential losses, Westchester can buy a reinsurance policy to cover the long tail of their written policy. So if Westchester gets unlucky and has to pay into that long tail (ie an unforeseen mega catastrophe occurs and they are on the hook), they will then submit a claim to their reinsurance carrier who reimburses them on the backend. As a recipient of that policy payout, you will only ever see Westchester's names on the checks. Also, Westchester's parent company, Chubb, has a reinsurance treaty which basically helps protect them from any crazy one time loss. The reinsurance/retrocession market is fascinating! It truly is insurance policies all the way down.
    - lotsofpulp 3y ago
      > It truly is insurance policies all the way down. The way it has always played out in my lifetime, it is just a few levels of insurance, and then future taxpayers. See Katrina, Sandy, 2008 financial crisis, 2020 pandemic, etc.
      - nashashmi 3y ago
proteal 3y ago
As a former property insurance broker whose clients had big claims ($100Mish) and worked around people who handled the real big claims ($1B+), I can't really tell you with any specificity of how this will play out. All I know is that it will be a huge mess, and the lawyers will argue in court for several years. Ultimately, someone will have to pay to rebuild the bridge. In the event of really big claims, it almost always end up being whoever has the deepest pockets. The process of discovery will list out who all the owners are and how much their policies cover this claim (whether intentionally or not!). As counterintuitive as this may sound, the insurance and reinsurance companies are actually pretty well equipped to handle this type of event. The underwriter(s) on the other side of policy will have to report the claim to their boss and the report will show they followed company guidelines. The boss can only shrug her shoulders and say "welp, can't be too mad because this is the business we are in." No one is particularly thrilled about paying the claim, but these situations are exactly why insurance was created. (For context, the "small" claims of $1M -> $10M hurt the most because they are the ones that throw off underwriter's models the most and cause the most unprofitability)
- cientifico 3y ago
  I can tell you how is going to play out. The people with less money for lawyers will be held liable. Normally the captain.
  - rightbyte 3y ago
    There was a pilot onboard, right? If I remember correctly they made the ship steer of course quite sharply. If the pilot dropped anchor and made the ship do that they might be in error.
    - nradov 3y ago
      Legally speaking, the pilot is only present in an advisory capacity. The master is ultimately responsible for safe navigation. As for the anchor, you seem to misunderstand the basics of ship handling. https://youtu.be/qZbUXewlQDk?si=GBPMFyHPZGAF1v5z https://youtu.be/qZbUXewlQDk?si=GBPMFyHPZGAF1v5z
unyttigfjelltol 3y ago
This isn't an insurance lawsuit. Interestingly, it's also not exclusively a ship owner petition. The petition also includes the ship manager. Another poster linked to a USC section protecting the ship owner on the basis of them not knowing anything that caused the loss. So that is what it is. Ok, but why would a ship manager also be able to benefit from such a limitation ? The USC section doesn't say anything about the manager, and unlike the owner, the manager was by definition an active participant in the casualty.
- _heimdall 3y ago
  Presumably the ship manager, and everyone else onboard, should only be liable if they did something wrong. If the vessel lost power and they followed all standard procedures, acting responsibly and simply couldn't avoid the collision, they did their jobs and shouldn't be financially or legally liable.
- shakahshakah 3y ago
  While I'm sure they'd love to "win" their petition outright, a major benefit of filing the partition is to force all future legal action through that single court system.
LgWoodenBadger 3y ago
I watched this video last night and found it enlightening. He covers the multiple levels of ownership of the vessel, liabilities, insurance, insurance clubs, pooled insurance, and reinsurance. https://www.youtube.com/watch?v=2Wim-_Q_59o https://www.youtube.com/watch?v=2Wim-_Q_59o From "What is Going on With Shipping?"
anonu 3y ago
https://www.igpandi.org/reinsurance/ https://www.igpandi.org/reinsurance/ Look at the graphic at the bottom of that link. Basically, there are multiple levels of insurance in the P&I space (property and indemnity insurance common in marine insurance). Insurance companies purchase their own insurance, aka reinsurance. The levels of reinsurance can be multiple layers deep. Insurance companies form clubs to spread out the risk to multiple entities. This stuff will be tied up in claims and courts for years to come.

by altacc 3y ago

baq 3y ago

It's worse (as in, more complex; better for the public, I guess) in that damages will be so big reinsurers are going to take a huge hit; they're probably not used to that.

Elkekec 3y ago
The exposure of insurance and reinsurance depends on the amount the ship was insured for (and there is a limit to that).
mschuster91 3y ago
> damages will be so big reinsurers are going to take a huge hit; they're probably not used to that. Nah, the re-insurances actually are used to big hits. Munich Re, one of the biggest in the world if not the biggest, pays out billions of dollars a year from nature disasters [1]. [1] https://de.statista.com/statistik/daten/studie/200297/umfrage/schaeden-aus-naturkatastrophen-der-munich-re-rueckversicherung-seit-2006/ https://de.statista.com/statistik/daten/studie/200297/umfrag...

clem 3y ago

It's certainly been a massive financial hit to the greater Baltimore area, so that sounds appropriate. Insurance companies need to account for large shocks -- it's the whole reason their industry exists.

jcarrano 3y ago

There are insurance companies that insure insurers. At each lever there are solvency requirements.

nashashmi 3y ago
Right. Base damage is covered by the first line insurer. The excess damage is covered by the backend insurer. Business is about managing loss. Nothing more. No further emotional support required.
- proteal 3y ago
  What you are describing is true, but there is a lot of nuance to how reinsurance plays out in large insurance policy towers. If you build a stack of insurance policies that work together to create a large single policy limit, you typically won't see reinsurance directly in that tower. If "Westchester Insurance Company" is anywhere on that tower as a carrier (whether first line, known more commonly as a primary insurer, or above that as an excess carrier), they will cut your check in the event of a claim. The money will come from their bank account, as will all the other affected carriers in claim. They are what you would consider a traditional insurance company. With that being said, Westchester may elect to purchase reinsurance to further reduce their risk. If they know the volatility of a policy is high or want to limit their potential losses, Westchester can buy a reinsurance policy to cover the long tail of their written policy. So if Westchester gets unlucky and has to pay into that long tail (ie an unforeseen mega catastrophe occurs and they are on the hook), they will then submit a claim to their reinsurance carrier who reimburses them on the backend. As a recipient of that policy payout, you will only ever see Westchester's names on the checks. Also, Westchester's parent company, Chubb, has a reinsurance treaty which basically helps protect them from any crazy one time loss. The reinsurance/retrocession market is fascinating! It truly is insurance policies all the way down.
  - lotsofpulp 3y ago
    > It truly is insurance policies all the way down. The way it has always played out in my lifetime, it is just a few levels of insurance, and then future taxpayers. See Katrina, Sandy, 2008 financial crisis, 2020 pandemic, etc.
    - nashashmi 3y ago

proteal 3y ago

As a former property insurance broker whose clients had big claims ($100Mish) and worked around people who handled the real big claims ($1B+), I can't really tell you with any specificity of how this will play out. All I know is that it will be a huge mess, and the lawyers will argue in court for several years. Ultimately, someone will have to pay to rebuild the bridge. In the event of really big claims, it almost always end up being whoever has the deepest pockets. The process of discovery will list out who all the owners are and how much their policies cover this claim (whether intentionally or not!). As counterintuitive as this may sound, the insurance and reinsurance companies are actually pretty well equipped to handle this type of event. The underwriter(s) on the other side of policy will have to report the claim to their boss and the report will show they followed company guidelines. The boss can only shrug her shoulders and say "welp, can't be too mad because this is the business we are in." No one is particularly thrilled about paying the claim, but these situations are exactly why insurance was created. (For context, the "small" claims of $1M -> $10M hurt the most because they are the ones that throw off underwriter's models the most and cause the most unprofitability)

cientifico 3y ago
I can tell you how is going to play out. The people with less money for lawyers will be held liable. Normally the captain.
- rightbyte 3y ago
  There was a pilot onboard, right? If I remember correctly they made the ship steer of course quite sharply. If the pilot dropped anchor and made the ship do that they might be in error.
  - nradov 3y ago
    Legally speaking, the pilot is only present in an advisory capacity. The master is ultimately responsible for safe navigation. As for the anchor, you seem to misunderstand the basics of ship handling. https://youtu.be/qZbUXewlQDk?si=GBPMFyHPZGAF1v5z https://youtu.be/qZbUXewlQDk?si=GBPMFyHPZGAF1v5z

unyttigfjelltol 3y ago

This isn't an insurance lawsuit. Interestingly, it's also not exclusively a ship owner petition. The petition also includes the ship manager. Another poster linked to a USC section protecting the ship owner on the basis of them not knowing anything that caused the loss. So that is what it is. Ok, but why would a ship manager also be able to benefit from such a limitation ? The USC section doesn't say anything about the manager, and unlike the owner, the manager was by definition an active participant in the casualty.

_heimdall 3y ago
Presumably the ship manager, and everyone else onboard, should only be liable if they did something wrong. If the vessel lost power and they followed all standard procedures, acting responsibly and simply couldn't avoid the collision, they did their jobs and shouldn't be financially or legally liable.
shakahshakah 3y ago
While I'm sure they'd love to "win" their petition outright, a major benefit of filing the partition is to force all future legal action through that single court system.

LgWoodenBadger 3y ago

I watched this video last night and found it enlightening. He covers the multiple levels of ownership of the vessel, liabilities, insurance, insurance clubs, pooled insurance, and reinsurance. https://www.youtube.com/watch?v=2Wim-_Q_59o https://www.youtube.com/watch?v=2Wim-_Q_59o From "What is Going on With Shipping?"

anonu 3y ago

https://www.igpandi.org/reinsurance/ https://www.igpandi.org/reinsurance/ Look at the graphic at the bottom of that link. Basically, there are multiple levels of insurance in the P&I space (property and indemnity insurance common in marine insurance). Insurance companies purchase their own insurance, aka reinsurance. The levels of reinsurance can be multiple layers deep. Insurance companies form clubs to spread out the risk to multiple entities. This stuff will be tied up in claims and courts for years to come.