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.
Rebuild cost: $600m [0]
I do hope We the People have zealous advocates.
[0]https://news.sky.com/story/baltimore-trade-implications-from...
I suspect that the actual cost to rebuild the bridge will be far higher than that. Initial estimates of large public works projects are virtually always too low, and actual costs can easily be 5-10 times higher.
There is a great book about this phenomenon (and how to avoid it) by Brent Flyvbjerg called "How Big Things Get Done".
Here in Tokyo, there's a relatively new bridge that's almost exactly the same length as the Key bridge in Baltimore, and was expressly designed to allow large ships to pass underneath:
https://en.wikipedia.org/wiki/Tokyo_Gate_Bridge
By my calculations (using the yen cost in the wikipedia article and the JPY/USD conversion at the time), it cost about USD $1.1B, so a bit less than double this estimate.
However, with the way things get done in the US these days, I suspect your 10x prediction is much more likely.
It probably needs to be earthquake-proof too, which maybe it doesn't in Baltimore.
They’re just going to put more dolphins around the pylons. They had a few already but they were poorly placed and had an opening a container ship could slip through.
It definitely needs to be earthquake-resistant; we get earthquakes here constantly.
Another interesting fact about the Tokyo Gate Bridge (from the Wikipedia article): it's basically made of 3 sections, the two sides and one smaller piece in the middle to connect them. The two side pieces are cantilevers, so they're self-supporting. So if a big container ship managed to strike one side and knock it down, theoretically the other side would remain standing, rather than the whole thing collapsing like the Baltimore bridge.
The entire project should be outsourced to a Japanese contractor. We're going to end up with a 10year $14bn bridge to nowhere, much like HSR in California.
>The entire project should be outsourced to a Japanese contractor.
You can't do that; it doesn't work that way unless perhaps you transfer ownership of all that territory to Japan.
This is a location that's on the opposite side of the planet. So you could obviously do the design work in Japan, but the construction has to happen on-site, which means
1) using local workers, and 2) dealing with local laws/regulations.
The labor force alone is hugely different between the two countries, not just the people themselves and their culture and language, but also how they're organized: contractors, subcontractors, unions, etc. A Japanese company with no experience working outside Japan would have no idea how to deal with all that.
Local laws and regulations are also an issue, since again the Japanese company would be unfamiliar with all that. In NYC, for instance, there's some crazy regulations about how many workers have to be present for stuff, which ends up driving costs up a lot. Just having a foreign company manage the project isn't going to change that stuff.
The ridiculous costs of American projects are due to many factors present in America now, and simply hiring a foreign company to manage a project isn't going to change those. America needs to fix its issues. Unlike a car or airplane, a bridge or subway isn't something you can just build offshore and transport to your country.
What helps push down prices of bridges, is to not build them in US.
Or at least, it always strikes me how outlandishly expensive infrastructure projects are in the US (for me coming from Europe, originally).
outlandishly expensive infrastructure projects are in the US
As someone in Europe I wonder where this notion comes from. Just about every major (and several minor) infrastructure project I can remember in my lifetime, in any of the European cities I've live in, has been both late and wildly over budget
Because it's true. Projects in Europe, especially big ones, often go over budget and are late. There are extremes like Berlin Brandenburg, but usually the price increase is in the order of 20-40%, which isn't too bad considering the complexity, and there's still good results in exchange. (E.g. Grand Paris Express will cost 50% more than originally planned (35 vs 22 billion euros), take a few years more, but it will result in 200km of all new fully automated, mostly underground, metro lines which will be amazing)
In comparison, in the US and Canada big projects are absurd. Take the Second Avenue Subway in New York - it's projected to cost $6 billion for 2.4km of track (no, that's not a typo, 2.4 km of track, really).
The California HSR is costing multiple times what similar projects in other countries cost (estimated to cost upwards of $100 billion, up from the original estimate of $40 billion for the first phase of 840 km; the Turin - Lyon high speed railway in more challenging terrain, including the longest rail tunnel in the world, is projected to cost around 25 billion euros for 270km, 1/4 of the price for 1/3 of the distance).
In fact there are lots of people and publications trying to understand why costs in US and Canada are so absurd compared to anywhere else in the world:
https://www.vice.com/en/article/k7b5mn/a-dollar100-billion-l...
https://www.vox.com/22534714/rail-roads-infrastructure-costs...
https://www.npr.org/2023/06/26/1184420745/why-building-publi...
https://www.marketplace.org/2022/03/28/why-does-transit-infr...
Case in point: https://en.m.wikipedia.org/wiki/Berlin_Brandenburg_Airport
That’s Scandinavia though.
Maybe I shouldn't paint all of Europe with the same brush. Although other comments are agreeing with my observation. And I agree that there's plenty to complain about in Europe too, but then still the total costs are often factors lower than in the US. It being outside of my professional field, I've found it quite hard to search the Internet for easily comparable numbers, but what I've been able to find over the years on cost per mile of road, or cost per meter of bridge, I've found sometimes a 10× difference between the US and the Netherlands (where I'm originally from). Maybe I'm confirming my biases, but I just don't think so.
Major infrastructure projects everywhere tend to be both late and wildly over budget, but the point is that in USA the initially budgeted cost (which is optimistic and doesn't get met) is outlandishly expensive even when compared to the actual wildly over budget cost of other places; what other countries say "wildly over budget" is still cheaper than a USA project that would get done on time below budget.
Similarly, just look at HS2 project in the UK, couldn't even get half way through the project before scrapping it.
i wonder that too (although we all know how intellectually comfortable it is to resort to tribalist thinking). human greed, inefficiency, and error is certainly not geographically restrained.
Not only that. you have to dismantle the old one and you will pay premium trying to get the new one done as quickly as possible.
> estimates of large public works projects are always too low, and actual costs can be 5-10 times higher.
The most recent example I can think of is England's High Speed 2 going from £35b to (est) £170b: https://en.wikipedia.org/wiki/High_Speed_2#Funding
A fair bit of the cost increase of HS2 was NIMBYs wanting it to be in tunnels after the route had been chosen, replacing a bridge should be easier to estimate.
Do you think that NIMBY factor won't apply when replacing this bridge? And are you really certain that "replacing a bridge" can't or won't turn into building some tunnels during the process, as some people are already suggesting? IMHO everything is possible.
Almost definitely billions and almost definitely multiple years. Planning, testing and clean-up alone could be over a year. It's far too early to even put a number on it.
Even if we assume $600m is the correct number, the expenditure is evenly distributed, and it takes 6 years to be fully up and running. Based on 3% inflation alone:
Year 1: $100m, Year 2: $103m, Year 3: $109m, Year 4: $112m, Year 5: $116m, Year 6: $119m = $666m
That seems an amazing value. Here in NYC, it costs $50-100M to build a subway elevator.
at quite literally impossible and only a fictionalized accounting to boot. too many cut checks, too many depository accounts, and never enough paper trail to know for sure.
so yeah, maybe—maybe less, maybe more, maybe no one has even the slightest clue, not even within a wildly outrageous range, of the true monetary total cost of anything at public infrastructure scale.
Given that there is sufficient capacity to route vehicle traffic to different paths, there is time to measure and plan: I would think people would look to a tunnel instead of a bridge in any rebuild of that route.
There is a tunnel further south in the Chesapeake Bay where there are navy/military facilities that cannot risk being blocked by falling bridges.
As I understand it, hazardous material loads cannot be transported through tunnels. So having a bridge that allows that (and prevents the need for hazmat loads being routed through the city center) does make some sense. I suspect the cost of a bridge replacement might also be cheaper than both a tunnel and redoing all the roadways and infrastructure leading up to it, but don't know for certain. If anyone has a more informed estimate, please share.
I hope not. I was irresponsible to let ships pass a dozen times a day through a flimsy contraption that could collapse at the first nudge. This risk was unacceptable.
Unacceptable!
The people of Baltimore have benefited for years of a port facility literally downtown, which is practically the same thing as building houses in a flood zone. Should have never been permitted!
I hope “We The People” accepts the responsibility for their actions!
the use of "flimsy contraption" and "first nudge" indicates your level of ignorance of the subject.
https://www.omnicalculator.com/physics/kinetic-energy
https://en.wikipedia.org/wiki/MV_Dali#Description
"Description
Dali is a Neopanamax container ship[7] with an overall length of 299.92 metres (984 ft), beam of 48.2 metres (158 ft 2 in), moulded depth of 24.8 metres (81 ft 4 in), and summer draft of 15.03 metres (49 ft 4 in). Her gross and net tonnages are 91,128 and 52,150, respectively, and her deadweight tonnage is 116,851 tonnes. Her container capacity is 9,971 twenty-foot equivalent units (TEU).[2][8]
Dali is propelled by a single low-speed two-stroke crosshead diesel engine coupled to a fixed-pitch propeller. Her main engine, a 9-cylinder MAN-B&W 9S90ME-C9.2[9] unit manufactured by Hyundai Heavy Industries under license, is rated 41,480 kW (55,630 hp) at 82.5 rpm.[2] Her service speed is 22 knots (41 km/h; 25 mph).[5] For maneuvering in ports, Dali has a single 3,000 kW (4,000 hp) bow thruster. Electricity is generated onboard by two 3,840 kW (5,150 hp) and two 4,400 kW (5,900 hp) auxiliary diesel generators.[4] "
As is often the case, the truth is far more complicated.
Firstly, the bridge - while up to code - did not have the kinds of buffers that could have been installed, or arguably should have been installed [1]
It isn't wrong to say that if you are going to authorise large container ships, if you are going to profit from large container ships as a harbour, and you are not going to invest properly in the infrastructure, you should take some of the blame when things inevitably go wrong. I don't know whether such buffers would have entirely saved the bridge or the people on it.
It also isn't wrong to say that if you are operating a large container ship, you should ensure it has failsafes in case of power failure. I don't know what failsafes exist (emergency anchors? Some kind of manual rudder?) that would be effective on a ship that large.
It also isn't wrong to say that given the public outcry, a scapegoat will likely be chosen, and it's more likely that they will scapegoat the foreigners rather than blame the politicians in charge of public spending.
[1] https://www.theguardian.com/us-news/2024/mar/26/baltimore-br...
> It also isn't wrong to say that if you are operating a large container ship, you should ensure it has failsafes in case of power failure. I don't know what failsafes exist (emergency anchors? Some kind of manual rudder?) that would be effective on a ship that large.
All large vessels require emergency generators. The requirement is usually startup within 45s but better performance is generally expected.
Here is an in-depth look on how steering systems on such vessels work:
This does raise the question of whether the new bridge will need to be larger and stronger. Will it need to be designed to withstand the hit from these new larger vessels?
>A notable example of dolphins used to protect a bridge is the Sunshine Skyway Bridge across the mouth of Tampa Bay. In 1980, the MV Summit Venture hit a pier on one of the bridge's two, two-lane spans causing a 1,200-foot (370 m) section of the bridge to fall into the water, resulting in 35 deaths. When a replacement span was designed, a top priority was to prevent ships from colliding with the new bridge.
https://en.wikipedia.org/wiki/Dolphin_(structure)#To_protect...
Ideally they'll put dolphins protecting the piers, but they may be constrained with channel width and location. The key would be to keep the piers from being hit, not to withstand a hit.
Flimsy:
- You are arguing how big the container ship is,
- It only emphasizes how weak the bridge is compared to the ship and obviously to all ships going through this harbor.
Obviously the bridge is not flimsy compared to mere thousands of cars, but when it’s a bumper on the side of the regular path of herds of 200 elephants of about 1000x the normal size ten times a day, then yes, it’s flimsy.
If you see a sign “Forbidden to elephants” tomorrow on your city’s preferred pedestrian bridge, it’s me. Now I wonder why your politicians didn’t put it for the bridge. It’s simple: The port should pay for dolphins and all security measures, or only sailboats will be allowed.
So yes, you arguing the size of the ship only emphasizes the flimsiness of the contraption.
I agree that:
> "flimsy contraption" and "first nudge"
Is crap just wanted to note that bridge protection do exist, Ex: https://www.drba.net/drba-proceeds-new-bridge-ship-collision...
So it could be argued that part of the responsibility is on the port authority that did not correctly ensure the safeguard of the bridge.
Pretty sure they're being sarcastic.
It obviously reads as satire.
"We The People" didn't try and operate a vessel with containers stacked so high its ridiculous.
Where were the tugboats? Bridges are not bumper cars. You cannot hit them.
To call it flimsy when the bridge carried 34,000 cars a day is silly.
I should not pay for gross misconduct.
Why did the boat leave the pier with a faulty engine?
The reality is complicated, there are liability arguments on both sides and a deal to be struck that'll land most costs on one party over another.
* Where were the tugboats?
* Why did the boat leave the pier with a faulty engine?
The ship was still within harbour waters under the control of local harbour pilots. They didn't have tugboats within near distance and they took the engine status on good faith.
As a risk management exercise if you run a harbour with high traffic then eventually a ship will have an engine|rudder|other failure within harbour waters and bridges will be struck with glancing to major blows.
It's an older bridge built before ship sizes grew, was the harbour infrastructure lagging behind the nature of the traffic it purported to serve?
Other harbours have pylons protected with substantial barriers, other harbours ban traffic | workers on cross harbour bridges when ships move (eg: Tasmania after they had a ship hit a bridge).
The ship maintainance was very likely at fault, the harbour should have mitigation plans against ship faults, etc.
> Where were the tugboats? Bridges are not bumper cars. You cannot hit them.
Through a bridges lifetime in a busy shipping lane you can expect it to get hit. Thus any reasonable bridge is designed with, or has barriers retrofitted to them.
It just US infrastructure lagging behind as is typical.
https://en.wikipedia.org/wiki/Dolphin_(structure)
https://www.drba.net/drba-proceeds-new-bridge-ship-collision...
This is actually a really interesting case.
Hear me out, a little bit of devil's advocate maybe..
If insurance company is forced to repay the whole cost of the rebuild, estimated it will cost lets say $600M. Tax payer is happy they're not paying via Federal taxes. But, shipping and logistics insurance companies start to ramp up their premiums and those fees are passed on to, eventually, the consumer over the long term, this could end up costing the tax payer more ?
If the insurance company pays 40~M and the federal pay the rest.. The tax rates will not go up based on this 600M rebuild, and if they do, no goverment will want to keep those higher rates. I cannot say the same for a private insurance company not wanting to keep their fees high if they're being paid anyway.
I’ll play with you:
It might not be such a bad thing to increase cost of trans-oceanic transportation. Right now we’re shipping stuff that makes little sense no to produce locally simply because (cost of overseas labor + cost of transportation) < (cost of domestic labor). I would suggest this is absurd both from an ecological and from a humane standpoint. Increasing the cost of transoceanic shipping might help flip the scales a little bit
Alternatively, I’d suggest that the premiums might not increase that much. Cost of insurance would be (cost of a claimable event)*(probability of such event). I’d hope the latter tends towards zero, significantly reducing the product of the 2.
We can also look at the potential impact of such a “new” policy on total insurance costs. Apparently, the Dali is able to transport 10k containers. And current shipping prices of $4,000 per container, that means that the cost of the trip alone is in the $40M range. If we take the lowest possible value of the goods, that’d be $40M and the arrival location. I’d argue that the probability of losing the vessel and its cargo is higher than that of hitting a bridge, especially if ports start deploying tugboats around their facilities
I think this can be applied more generally as: Everything should be priced in. Lots of big problems seem to occure because externalities are passed down to future tax payers. Pollution, climate change, garbage etc.
Great comment. Made me pause to think
Some form of this "but what about the consumer" argument is rolled out every time a corporation screws up. It's an incredibly effective way of deflecting responsibility by claiming to be acting in someone else's interest.
My rebuttal is "moral hazard." Why should Boeing bother making planes that stay in the air if they can always count on a slap on the wrist and, in the worst case, a bailout.
Also the market will only bear rate increases to an extent and so some of this cost will actually be eaten by the shipping industry and the insurance industry and result in lower profits.
This is a great question with a lot of interesting nuance! I don't have deep expertise in maritime insurance but I do know enough to be dangerous.
Let's just look at the boat insurance, because the bridge and the cargo all probably have different policies covering them with vastly different terms. Marine insurance is odd because it actually just sucks as a business to be in. Boats aren't cheap and they sink too often for normal companies to realistically make any profit. But we still need insurance on our boats, so the industry basically has created a big mutual insurance pool. There are like 8 or 9 insurance companies that are owned by the businesses that purchase their policies (this is the definition of a mutual insurance company). So when a big claim is paid out like this, the entire shipping industry bears the cost because these same companies essentially share the risk on all shipowner's policy. Shipowners can't complain too much - there is literally no one else who will sell them insurance so they have to do it this way (Not having insurance is a bad idea 99.9% of the time). The deal is not all bad though, if there is a good year with fewer claims, the shipping companies get some money back. And because the risk is pooled via mutual insurance companies, they keep appropriate stashes of money in case there is a bad year. Actuaries are tasked with figuring out how much money to hold on to at any given time so hopefully there is never a capital crunch.
Will this cost be passed on to consumers? Tough to tell. I'm stepping a bit out of my expertise here, but my inclination is that there won't be outsize costs put on consumers. Roughly speaking, since the entire industry bears its fair share of marine insurance costs on a company by company basis, if one goes up, they all go up. So if that means shipping a crate from China to USA is more expensive because the space on that boat becomes more expensive, then consumers pay more. What's that saying again? A rising insurance premium lifts all shipping costs? However, I don't think that consumers will unfairly be paying additional costs to get their goods because of the mutual nature of boat insurance. Furthermore, the company you transact with (say Wal-mart) may just eat the additional cost of shipping in their margins or force shipping companies to eat the cost instead. This is all assuming the federal government doesn't pay for the rebuild. I don't think the government will pay any substantial amount on this claim given how well insured all parties seem to be.
No, we've already pre-paid for this insurance claim by paying higher prices for goods so that the shipper could be insured. The insurance company doesn't get to claim that they were unprepared for this. What have they been doing with the insurance premiums for the last however many years?
And on top of that the insurance company is probably also insured
> If insurance company is forced to repay the whole cost of the rebuild, estimated it will cost lets say $600M. Tax payer is happy they're not paying via Federal taxes. But, shipping and logistics insurance companies start to ramp up their premiums and those fees are passed on to, eventually, the consumer over the long term, this could end up costing the tax payer more ?
Isn't this the point of insurance and specifically underwriters - that they aggregate the possible outcomes over a huge set of assets, with the expectation that sometimes they will have to pay out if an accident or whatever happens?
There should be no increase in anyone's premium. Though, from a marketing perspective, given the level of publicity that this event has gotten, perhaps people are primed for a raise - and this is a good time to do it!
Honestly, "insurance" sounds like an ideal area for a headless company. Its really only providing an aggregation of certain risks, so no individual company person is wiped out. The more assets it manages, the less risk they have, and the more the price of the insurance should drop.
eventually, the consumer over the long term, this could end up costing the tax payer more?
Hedging against loss is a cost of doing business. Theft is built into the pricing at grocery stores and other retailers. Why should shipping be different? Yes, the sums are MUCH larger, but the general point is the business should account for its costs as part of its budget.
This sounds like a variation of "too big to fail" - the answer may very well be require smaller/safer ships. That would cost more, but long term, might do a better job accounting for the costs of loss.
But you also want to count where the $600M go to. Yes, US taxpayers pay for it eventually, but they pay it to some other taxpayers (assuming the developers also US-based). So the money get back to US economy in the end.
Granted it's still bad for the economy, but just counting money is not enough. E.g. spending huge money on Hoover dam and Golden Gate bridge was good for the economy at the time.
You just eliminated the whole point of insurance.
If every time the government is going to pay, then the obvious next step would be to get rid of insurance altogether ant everything would be cheaper yet.
They also eliminated the entire point of liability.
Apparently step 1 standard filing for cases like this. Law firm doing boring lawyer things.
The Exxon Valdez took 26 years to finally litigate, so maybe check back in a couple decades.
Is there not some responsibility on the US govt to reasonably protect its infrastructure in a common maritime path? The harbor long preceded the bridge, and when the bridge was constructed, the harbor had massive container ships moving in and out. No dolphins or starlings around a single point of failure for an entire bridge span? Whole a bridge collapse like this is rare, bridge strikes are not uncommon.
It seems like even modest defenses to slow the ship or push some energy aside could have mitigated a collapse.
The bridge opened in March 1977.
A cargo ship at that time would have maxed around 3000 TEU (pre-Panamax).
Dali is close to 3x that size at just shy of 10,000 TEU.
And Dali basically center-punched that bridge support. And swerved very close to the bridge. A dolphin might have mitigated a glancing blow, but I doubt it would have stopped a direct hit such as this.
I'm sure the replacement bridge will have more protection, for the optics if nothing else. But, we can't really afford to redesign bridges every time a larger ship is built.
But the bridge had _no_ apparent protections even for those 3000 TEU ships. Port of Baltimore spent considerable (federal) funds dredging the harbor to make way for Panamax. A bog standard ring of rocks or concrete or steel piles could have dissipated enough energy to have a very different outcome.
I’m just asking, should not the obligation for reasonable protection of the bridge be on the government or port authority?
> A dolphin might have mitigated a glancing blow
Are you referring to the animal, or is this slang for some sort of nautical device?
The upper span has concrete dolphins, the lower span does not... https://en.wikipedia.org/wiki/Dolphin_(structure)#/media/Fil...
What I don't know is how much protection these would offer in a direct hit like the Dali on the Key Bridge. They definitely work for glancing blows and smaller vessels. Would the Dali just push right through/over these? Or would the impact move enough earth (below the surface) to cause the bridge major structural damage?
"I mean, how hard could it be?"
It's an incredibly rare event. Retro-fitting things in the water is crazy expensive. Somebody estimated that the force hitting the bridge was 30 Million Pounds. That's a lot of protection needed.
The Florida Sunshine Skyway bridge uses concrete “dolphins” to protect in water support systems, after a similar catastrophic cargo ship collision event.
https://maritime-executive.com/article/baltimore-bridge-coll...
Maps I've seen of the water in the affected area (I'm not sure what the technical term is, nautical chart?) indicate that the channel depth near the bridge is alittle over 15m deep. According to Wikipedia, at its heaviest the dali sits on the shallow side of 15m below the water. I'm not sure what you could reasonably do to impede a ship with such little room.
It's a pretty huge ship. How do you stop it?
It's pretty shallow[0], looks like about 10m deep around the abutment that was hit; I would think that a big pile of rocks around the abutments that supported the piers on each side of the channel would do it. I just found out you call this RipRap[1] in the US which is cool, in Britain it's called Rock Armour. Total guess but a hundred meters in either direction parallel to the channel by 50 wide? That's about 100,000 tonnes of rock. Something like that? Something close to $50-$200 / tonne delivered? So range of $10m-$40m for both piers, so call it less than $100m. These are guesses which I am making from another continent! so probably the right order of magnitude but not much more accurate than that. I imagine it would have cost a lot less than $8bn dollars, 6 peoples lives and the indirect disruption to the US economy. With hindsight a suspension bridge or a cable stayed bridge with piers well away from the channel might have been more suitable. That style of structure is pretty old-school even for the 1970's, I wonder if it was designed like that because of ground conditions or something, or that was just the cheapest way of doing it in the US at that time and place?
[0] https://webapp.navionics.com/?lang=en#boating@15&key=gqjnFz%... [1] https://en.wikipedia.org/wiki/Abutment
Edit: Changed distribution to disruption.
Please tell me what you think the "modest" defense is to divert the mass of a fully loaded container ship?
Sometimes bad things happen that cannot be "modestly" prepared for. That is why these vessels are required to be insured.
Pile of rocks and concrete. Common stuff. It’s a shallow harbor and an interstate bridge. Just needs to reduce impact speed.
There's a lot of excellent discussion in the comments on who should ultimately pay.
One interesting aspect: if insurance gets too high, it incentivises corporations themselves to be the insurer. I mean the literal corporate limited liability.
Would they not be incentivised to put each major asset into its own corporation, and in the event of a major loss that corporation becomes bankrupt?
You know what else has limited liability? People. A burger flipper making $30k/year can cause millions in damage by driving a car and crashing into a family of 4, sending them to hospital. The way we fix this is mandated insurance, so in the event something bad happens the insurance pays rather than having the family trying to collect a multi-million dollar judgement from someone with negative net worth. It's pretty easy to imagine cities/states/countries doing the same thing. If you want to sail into our waters, you need to carry insurance. I'd be surprised if that isn't already the case.
I'm not exactly sure how it all plays out, but if a company claims to not be able to pay, the lawyers will "pierce the corporate veil." Essentially they will ask for an ownership diagram and keep working their way up to the ultimate ownership entity. This trick doesn't work for real businesses, and only kinda works for fraudulent ones.
It sounds like that is already the case.
Up to the point where it’s considered criminal negligence by the executives.
I've never been about to figure out what the word should means.
TLDR of the logic behind that sum for anyone else who wondered like I did:
They claim the ship's value before the crash as $90M, and that estimated costs for salvage and repairs to the ship are $19.5M and $28M respectively, leaving the value of the ship now at $42.5M (points 15-17 in the main document).
They then add the value of pending freight ($1.17M): "Petitioners offer an Interim Stipulation of Value in the amount of $43,670,000 (i.e., sound value of the vessel plus pending freight less repair costs and salvage costs)." and mention that they'll file updated numbers once salvage and repair costs are confirmed rather than estimates.
IANAL nor in the US, so I'm curious whether this is standard law to be able to limit your liability to the (post-crash) value of the ship and the only thing in question is how the numbers end up, or if it's a long-shot hope that the companies' lawyers figured they might as well try asking for in case a judge feels friendly?
> IANAL nor in the US, so I'm curious whether this is standard law to be able to limit your liability to the (post-crash) value of the ship
46 USC 30523: General limit of liability [1]
"In General.-Except as provided in section 30524 of this title, the liability of the owner of a vessel for any claim, debt, or liability described in subsection (b) shall not exceed the value of the vessel and pending freight.
[...]
liabilities subject to limitation under subsection (a) are those arising from [...] any loss, damage, or injury by collision"
Of course, this is kinda what limited liability is - even if the law didn't say that, the owners of a $90M ship could simply set up a limited company that just owned that one ship and had no other assets, and simply declare bankruptcy if liabilities exceeded the value of the ship.
[1] https://uscode.house.gov/view.xhtml?hl=false&edition=prelim&...
It happened in a port so it's a very solvable cost-sharing problem: if you have an unprotected bridge, don't let big ships near it without posting a special bond or making a special commitment to protect the bridge above this liability.
I was wondering how isolated the ownership was and the NYT reports that Grace Ocean Pte Ltd own 55 ships (according to Equasis).
So not as much as I expected.
An answer like this would need to refer to the policy provisions to really know, but I'm willing to bet the ship should is valued at Replacement Cost. Replacement Cost varies depending on the term of the policy, but the goal of the definition is to get the policyholder back to where they were before the accident (technical term is to indemnify the casualty). This definition typically looks like this: "We will pay the cost to replace a like kind and quality boat OR we will pay the cost to get your damaged boat back to operational state, whichever is cheaper for us." My guess is that the book value of the boat is $90M (what you would get if you sold the boat on the open market, representative of the present value of the asset's economic returns), but to actually build/repair that boat is cheaper. Insurance companies don't want to pay the book value because they aren't getting an economic return on the boat.
You're talking about how to value the boat owner making an insurance claim (if their policy does indeed match your assumption), whereas I was talking about (and the court filing is about) a different equation which calculates what the current value of the boat is. But I'd also hazard a guess that their insurance policy does not cover this accident for some reason - because if they know their insurance policy is about to turn the boat back to its $90M value then surely this court filing claiming its new lower valuation estimates would be fraud?
Edit - actually the document does talk a bit about insurance on pages 10-11, but I don't think I understand it in the context of their claim lowering the value of the boat:
"NOW, THEREFORE, in consideration of the premises, Stipulator, The Britania Steam Ship Insurance Association Europe, an entity organized under the laws of England and Wales, hereby undertakes in the sum of $43,671,000, with interest at the rate of 6% per annum thereon from April 1, 2024, that if judgment is awarded against either or both Petitioners, such judgment may be entered against both Petitioner(s) and Stipulator for the amount not exceeding the aforesaid sum and interest.
Stipulator, The Britannia Steam Ship Insurance Association Europe, hereby submits itself to the jurisdiction of this Court in connection with this Stipulation and agrees to abide by all orders and decrees of the Court, intermediate or final, and to pay the amount awarded by the final judgment or decree rendered by this Court. If the final judgement or decree is appealed, Stipulator agrees to pay up to the principal amount of this undertaking, with interest at the rate of 6% per annum, unless Petitioner(s) pay such judgment or decree or, in the meantime, the amount or value of Owner's interest in the Vessel and its pending freight in connection with the voyage shall have been paid into Court by Petitioner(s) or a subsequent approved Stipulation for Value thereof shall have been given, in which case this Stipulation shall be void."
Here's an interesting (IMHO) primer on marine insurance, from the What is Going On with Shipping channel:
It’s amazing that the captain of such a large vehicle has through the results of their choices the capability to do so much harm
Now consider all the people driving around in their cars everyday.
Right, but I think it would be quite the engineering challenge — or, ‘evil genius side quest’, whatever you wanna call it disturbingly — to cause $600 million worth of damage with a sedan car. Tho, YMMV, that’s just me.
But there are a million times more “sedan” cars than boats, traveling a million more miles.
An 18 and a 78 year old just killed two different sets of four people a couple weeks ago in SF and near Seattle. The 18 year old totaled his 3rd car in less than a year driving far above the speed limit.
https://www.cbsnews.com/sanfrancisco/news/san-francisco-medi...
https://komonews.com/news/local/renton-deadly-multi-vehicle-...
Edit: to respond to below, it depends what you count as damage. Do you count all the deaths and injuries of all auto vehicles? There are 40k+ deaths and many more injuries per year in the US. How about the effect of car centric designs on kids not being able to roam around neighborhoods? Of course, it all gets abstract very quickly, since you also have to start comparing benefits, but there are very large systemic effects (and just the same with huge container ships of course).
That's a good point about relative frequencies, and it's the saddest of tragedies what occured in the stories you list. So tragic...
In the abstract, outside of the tragedy of these unfortunate events, it's true that there's more cars, however...think of it like, there's far more background radiation particles than neutron radiation particles. But the damage you can do with one, is far less than the other.
The highest third party auto insurance claim I've heard of was £34 million in 2001 (probably about $90 million today).
The driver (of a Land Rover towing a car on a trailer) fell asleep at the wheel and crashed onto train tracks. A passenger express train hit the car and was derailed into the path of an oncoming freight train. 10 people were killed.
Achievement unlocked I guess? A tragedy. But no you’re right, that is a Way to cause lots of damage with a car. Still involves Heavier vehicle tho
If a broke drunk driver knocks a packed school bus off a cliff, that could easily be 600 million dollars worth of medical bills, if all the kids survive but become permanently disabled. And nearly all of it would have to be covered in the end by the taxpayer.
No ‘side quest’ needed, just a few seconds worth of bad decision making.
Right, but conceivably rarer (thermodynamically, in terms of ratio of possible microstates/ensembles) than ships hittin bridges!
So, doesn't really compare. Yours is more of a hypothetical, mine's more of a reality. Haha! :)
How is that disturbing? It takes far fewer hours of labor to deal with a death than to provide lifelong healthcare.
I agree: we allow people to be in command of thousands of kilos of metal, moving at up to around 30m/s, with really quite minimal training.
(For anyone who is reading this, I think the parent is referencing driving cars)
I thought they meant ships
Right? and yet so much focus is put on the operators of US$60 million machines like an F-18 or even commercial aviation pilots… and yet, it seems like their capacity for harm — and, as an aside I’m not saying that it was any human error that caused this, — but the capacity for harm of these aviation operators is, to be honest — 9/11 notwithstanding OK OK bear with me — is, perhaps a little less than the operators of these pervasive ubiquitous Gigantus ships
Where was this his choice?
I, sir, am not saying it was. Yet pointing out how it could be, In some hypothetical past or future scenario, a reality worth considering
To be clear, I fully believe the official statements that this crash was accidental - putting that up front to avoid seeming like I believe any of the nonsense conspiracy theories that came out about the accident.
But if you were someone like Russia or Iran who wanted to financially hurt the US (or any other country - and, equally feasible for the CIA or Mossad or whomever to use it as tactic to financially harm any enemy country with a significant port; or a terrorist group wanting to kill people seems less likely but not impossible) - wouldn't you be having that same thought now?
Secret services of various countries surely wouldn't find it hard to plant agents in shipping companies who end up captaining huge container ships around the world if they wanted to, and there's probably enough low-security situations for the boat when docked that gaining physical access (through spies taking engineer jobs or through sneaking onboard at a quiet time) could maybe allow some sort of sabotage equivalent to partially cutting the break lines on a car, which could be planned to cause problems roughly the right number of minutes after a ship leaves port to have the highest chance of impact.
If your goal is hurting a country financially rather than murderously, and you want an illegal way to do it that's completely deniable and even looks accidental, I'm not sure how many better options there would be?
I hope I'm wrong and it wouldn't be as easy as I'm imagining for any major country to place someone they trust (but won't be linked to them / suspected) into a career leading to being a captain on these ships...
(It might not even be limited to state actors - it's not unprecedented for a business executive to be a psychopath willing to commit crimes to boost their business, what's to stop the CEO or owner of a port, or a toll bridge, or a construction company from bribing a ship's captain with $20M dollars to take a port or bridge out of action, even a brief closure could be worth enough money to alternative locations and/or companies hired to fix it to make such a huge amount more money that a huge bribe would still make it wildly profitable. Obviously most companies won't have people specialised in committing this type of crime, so it wouldn't be easy to find the right captain who'd accept a bribe for that, yet alone do it without getting caught, but the captain could maybe create a fake medical emergency to cover their "mistake", etc... hopefully it's such a big criminal risk, and hard enough to do, that there wont be any crossover between the hopefully low number of psychopaths in positions of major corporate power and people who could pull it off if they wanted to.)
No, I completely believe this was just some mechanical Newtonian inadequacy that was accidental. However, I’ve never considered the possibility of sabotage, but now that you mention it holy fuck yes that must be a possible threat vector.
Other than hearing and dismissing a few people online suggesting this incident was an act of terrorism, I hadn't really thought further about it until your comment which made me go "oh... yeah, that does sound like it might be extremely feasible for a future attack, fuck."
A lot of a society’s “wealth” and “quality of life” is due to being able to trust others to act with some minimum level of integrity.
Otherwise, the society ends up looking like Somalia or Congo.
Totes, man. It’s like slow moving rods from god kinetic weapons… next people will figure out how to weaponize glaciers
Most ports use harbour pilots, so you couldn't just drive a ship into a bridge or other structure and claim it's an accident, but it seems like an easy accident to create (oops, steering broke).
If the ship simply refuses to let the pilot board though, so the port authorities know something is wrong, once it's in port and on route, what do you do? Even if you get the military to blow it up you've got a massive sunk hulk blocking your port.
Why rebuild a bridge? Watch this and wee at the cost for a tunnel these folks managed to make: https://www.youtube.com/watch?v=EruSZNI4th4
A tunnel would be ideal here (and the other crossings are already buried). But I doubt it's in the budget.
Some helpful context: https://www.ft.com/content/c44306cc-6057-4ca3-923d-d67d09676...
Yes - this is great additional information. Here's some additional context around the article. Lloyd's of London is the original insurance company. They work in a syndicate structure, where the various other commercial insurance companies (think AIG, AXA XL, Starr, etc) all work together to share risks using their domestic balance sheets. I'm simplifying a lot here, but the insurance policies covering the various entities are stitched together like a quilt. No overlap and when assembled you're fully covered! For example, one insurance company may say they will cover the first $10M of a claim, another might share the next $10M of coverage with a few other companies, etc. They do this to limit their losses on a program. It's a lot more manageable to pay out only a small share of the claim than it is to pay the entire thing. By doing it like this, the brokers build out an insurance program for the covered entity that pulls in capital from across the globe in a very cost-effective way. It also has the added benefit of not stressing any one insurance company too badly.
What Neal (Lloyd's boss) is saying is "hey guys, we know we are all hosed here. It's gonna be an easy billion, probably more. Just because you're only expected to pay claims above $100M, you're certainly going to have to pay out. Let's not be knobs and pay this claim quickly to get the port back on their feet again"
I think the legal term for this is “Can’t Blame a Brother for Trying”
What is Going on With Shipping? has a good video on 'who pays':
* https://www.youtube.com/watch?v=2Wim-_Q_59o&t=10m17s
TL; DR: it can get complicated.
There is the owner of the vessel, the operator of the vessel, and the 'customer' of the vessel. An analogy used: when you have a delivery from Amazon, Amazon would be the 'customer' of the vessel, the delivery guy would be operator of the vessel, and he would have rented a vessel/vehicle from (e.g.) U-Haul. You would think that you'd sue the operator (delivery guy, and maybe the customer (Amazon)) if he wrecked your property, since he was driving it, but maritime insurance doesn't work that way: you sue the vessel owner (U-Haul).
Then there's owner of the bridge (insured by Chubb), and then the re-insurance that Chubb has. Re-insurers are generally part of P&I clubs as well, so there's pooling of risk above the pooling of risk (which generally are activated in stages):
* https://en.wikipedia.org/wiki/Protection_and_indemnity_insur...
* https://www.youtube.com/watch?v=kpBOptxuDnk
Then there's force majeure:
* https://www.handybulk.com/what-is-force-majeure-in-shipping/
* https://en.wikipedia.org/wiki/Force_majeure
* https://www.bimco.org/news/contracts-and-clauses/20210216-wh...
See also general average:
> The law of general average is a principle of maritime law whereby all stakeholders in a sea venture proportionately share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. For instance, should the crew jettison some cargo overboard to lighten the ship in a storm, the loss would be shared pro rata by both the carrier[2] and the cargo-owners.
I stopped reading at point 13
>13. The Casualty was not due to any fault, neglect, or want of care on the part of Petitioners, the Vessel, or any persons or entities for whose acts Petitioners may be responsible.
This comes out of nowhere and they base everything on this statement! Amazing
It's a petition early on in the case, so it just needs to be based upon "information and belief". The fact-finding step of the multi-year process has yet to begin, but lawyers need to present the best plausible case possible at this stage.
There was no fault neglect or want of care. The engine failed. The ship was out of control. It was not bad maneuvering. It was not sleeping on the wheel. It was not want of care (it was piloted by a harbor pilot).
The engine failing isn't some random, unlucky event. Regular maintenance and inspection should prevent this. Whenever this happens to an airplane it's considered negligence - there's no reason why we shouldn't have the same standards for ships.
"Regular maintenance and inspection should prevent this."
Not always. We have regular maintenance done on our SMT lines by the company that manufactured the machines. Those things still fuck up once or twice a month, very unexpectedly, and almost always in the middle of a high-value operation (IC or LED placement.)
If the engine on airplane fails, it fails immediately before taking off. Destruction is kept to a minimum. Likely no one dies.
Ha! But that was a foreign object getting in the engine. And I guess it failed immediately
You have no damn clue what you're talking about.
A bit premature to declare so, don't you think? What if it comes out that corners were cut regarding engine maintenance or something along those lines?
That will have to be an argument that is made and it will be a difficult argument to make.
“Engine was not maintained well” is so deeply opinionated. The first thing they do is check standards. Was it oiled? Were the parts replaced periodically? Was the fuel type correct?
It could be a mistake. “What kind of engine?” “It needs this type of fuel.” “Oops, no, that was for the older ship. This is a different ship.” “The ship already set sail.” “Nevermind then and keep your mouth shut.”
exactly, is there already an official verdict sourcing from official investigation? I don't think so Furthermore, the engine is part of the vessel, if the verdict is that the engine failed then the vessel owner/insurance can claim any penalties(plus extras) from the engine manufacturer
On the other hand, what if it comes out that the engine failed due to contaminated fuel?
Why did the engine fail?
That's what the NTSB investigators on board since the crash would be seeking to find out.
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Privatize the profits and socialize the losses, here we go again.
The profits are also socialized, in that a huge chunk of US people are hurt financially when the bridge goes down, illustrating how most of us benefit from having stable flow of goods and services.
If you (and millions of others) did not benefit from having this bridge, then you (and millions of others) would not now have lower quality of life when it fails.
I was obviously referring to the profits of the shipping company, made by cheaping out on maintenance, safety, etc...
Your implication is that society pays for those profits without getting anything in return. This belief is not true.
You know, you can do that too….
you exist in the same system
> You know, you can do that too….
ehh no, that requires either money or power which is neither available to all
Not all of us are greedy sociopaths, thank you.
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the system isn’t saying that any particular outcome is better or worse
and what’s more likely is that the insurance you’re required to have told you to do this in order to keep the insurance, regardless of your individual predilection
#/media/File:Skyway_Bridge_old_and_new.jpg){kind=link}
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)
My understanding is that the insurers like these situations - it makes it obvious how important good insurance is and sales go up. The individual impact seems large to the layperson but is within the models of the insurance and reinsurance companies over time.
There is an analogous situation in (e.g. sports) betting. Every now and then someone places a really long bet on something like Leicester winning the Premiership and then gets a collosal payout. Inevitably there's some naive speculation that the betting shop will be very unhappy with this. In reality theae u likely events happen relatively infrequently (often disproportionately to even their long odds) and the publicity from such an unlikely win more than makes up for the payout.
It’s not random. It’s called the Crentist effect or nominative determinism.
Or, cynically, their original odds were right but they have taken the opportunity to reduce payouts because punters now consider that event more likely and thus would accept less.
It's less of an indication of bookies' predictions and more of an indicator of bettors' predictions.
A bookie isn't trying to gamble on the outcome; they're trying to get the bets to all balance out so that no matter what the outcome they take in enough money from the losers to pay the winners with some profit leftover.
As more people bet on a specific outcome, they will lower the odds to make sure that the pool of money taken in is still big enough to pay out if that outcome happens.
Are those two events/teams comparable so that one could expect the same type of odds?
I'm not much into betting, but will not the odds change also based on how people are betting. So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically?
So big payouts become an organic marketing expense. Clever!
Ideally the bookie is acting as a broker and not directly making a market. Theoretically if they’re accepting bets for Leicester winning the Premiership at 5000-1, they’re also accepting bets that amount to that not happening at offsetting odds.
Proper betting shops are market makers, ideally balancing their books such that they profit by the house spread regardless of outcomes. A bookie that takes on a substantial net position is accidentally gambling with their own money.
I'm not familiar with betting in general but is there even a bookie this days? Or is that a company (one of the thousands flooding social media with ads lately)?
It seems, like in other industries, being large helps to weather out such rare events.
Most "individual betting shops" are a sales agent where the actual "book" is run through bet365/paddypower (at least the ones aboveboard in the UK).
The corollary is the scenes from the movie “The Grifters” where one aspect of Angelica Huston’s character is she goes to tracks to put large bets on long shots to lower the impact on the mobs illegal bookmaking system, in case the horse actually wins.
It’s not mentioned in the movie. I have to guess that they only do that if there is a large bet pending, rather doing it to all the long shot horses.
Some gambler dropping a 10k bet, and have her put $1k on the horse is enough to really rock the odds. Perhaps, mob accounting is not my specialty. And, of course, it’s just a movie.
Is it? The best "insurance" against this seems to be a rat's nest of sufficiently small LLCs which then conveniently go bankrupt when something big happens (losing only the assets in that LLC at that time). Imagine a shipping company where each ship is its own LLC. If the ship sinks, well too bad, the only meaningful asset that LLC had was the ship, oops.
I assume ships are required by law to have insurance before being allowed to go in certain places, to make sure damage they cause is covered. But that would make it hard to sell "better" insurance than the legal minimum when it comes to catastrophic claims.
That's why insurance is heavily regulated and there are requirements on capital available for claims in order to operate in the jurisdiction. And of course savvy clients (like the ones managing $100MM container ships) will do due diligence on this as well.
Pretty much every large merchant ship already has insurance. The market is saturated and there's no way for sales to go up. Marine insurers might use this incident to justify increasing premiums, though.
I would say yes, but realistically all large enough companies purchase adequate insurance for known categories like property and casualty. So this particular claim probably isn't making waves, but there have been claims in the past. For example, when that dude shot up the AMC theater during the Dark Knight, literally every other theater chain bought as much terrorism insurance as the market would sell them. Ironically, because the risk was elevated after the event, price went way up and coverage offered went way down because underwriters saw it as a losing bet.
I read that Barclays estimated total insurance claims would be $2-3B ($1-1.5B for bridge and rest for wrongful death claims and loss of business), with most of that falling on the Lloyds of London market. FYI they received over $65B in premiums last year (and made a profit of $10B)
I can tell you how is going to play out. The people with less money for lawyers will be held liable. Normally the captain.
Oh, I thought you meant the taxpayers (ok, they won't be held liable, but are still the most likely to pay for it in the end)
The captain can be fired, sure. Pay anything? Extremely unlikely. The liability for accidents stops at the company, unless there was a clear intent from the captain to cause the disaster but now we're in criminal court.
The people harmed with less money for lawyers probably won’t get anything, I can see that happening.
Automakers might get a payout for the shipping delays, but people waiting longer for their new car won’t see any of it.
The people’s commutes that will be X minutes longer for the next while will have to just suck it up.
Same for anyone paying a few percent more for goods that have to be imported through other ports.
Holding the captain liable would be like trying to get a blood transfusion for an elephant from a mosquito.
They could be one of many parties considered liable. Lawyers will justify spending $20k in legal work on themselves for an extra $100ks in recoveries, even if that’s a part of $billions.
Quite possible the captain has their own liability insurance. Dunno how the professionalization works at sea.
Unlikely given https://en.wikipedia.org/wiki/Vicarious_liability#Employers'...
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.
Dropping anchor could very well be a thing you do.
To me it seems like the boat steers of course after regaining power. Am I imagining things? I guess it could happen by chance too, as drift takes on?
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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.
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.
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.
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.
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.
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.
> 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/umfrag...
The exposure of insurance and reinsurance depends on the amount the ship was insured for (and there is a limit to that).
There are insurance companies that insure insurers. At each lever there are solvency requirements.
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.
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.
You know, it's funny you mention Warren Buffet. I asked the Berkshire Hathaway guys the same thing when I first started as a broker! Turns out they can't go asking Mr. Buffet for money in case they run out. He expects them to run a tight business and hold the proper amount of money on hand to pay out any potential future claims. The natural followup was me asking if the underwriter had ever met the man himself. The closest he ever got was an unrelated picture at the shareholder conference in Omaha where Buffet was off in the background autographing something. Back on topic, you may be wondering how does an insurance company know how much cash reserves to have? The answer is to hire a bunch of wicked smart actuaries who go to school for 8 years that can calculate all this stuff for you. They tend to do a very good job and are paid handsomely for their efforts. As a fun perspective, let's take a look at AIG's balance sheet [1] (A balance sheet is like a database summary of all the stuff the company owns and to whom they owe money). I pick AIG because they only do insurance so it's easier to tease out the insights we want from the data as BHS is a subsidiary of BH and gets mixed in with other companies. AIG's market cap right now is $53B, but they've got $540B of stuff they own! That's 10x their market cap. Most of that will be paid out in claims (hence the balance sheet showing liabilities, aka what they owe), but what's leftover is the residual value of the company. It's a neat finance trick that you can buy $540B of assets for only $53B by buying AIG outright. Regulators know this trick so don't think you and your friends can pull a fast one. It just goes to show how capitalized insurance companies are. If you really want to dig deeper, there are many rating agencies (AM Best or S&P being the most popular) that assess the ability of insurance companies to pay claims. Brokers don't advise clients to buy insurance rated worse than A.
Regarding ultimate insurers, you're spot on that the answer is a big ol' "it depends." People buy insurance for three reasons, listed in order of how important I think they are. First is balance sheet protection (I worked hard for my stuff, I can't afford to lose it). Second is for contractual obligations (Nobody will do business with me if I don't promise to make them whole if things go wrong). Last is because the government says you have to. When you think of a claim happening where there is no insurance available, run through that checklist to see what what could potentially happen. Since you listed a few concrete examples, I'll go through them and opine how things may play out (remember we're in imaginary land and without policies I can't really say anything for certain).
Fire damages - I think of the Camp fire. In 2018 California was set on fire because of some transmission lines caused a spark. This is a big claim caused by an individual entity, so the normal rules don't necessarily apply here. But in general, the way it works is if my house caught fire because of this Camp fire, my insurance policy on my house WILL cover the claim. Whoever writes my policy will cut me a check and replace my home (subject to policy terms). What will then happen is my insurance company will the subrogate the claim to the entity that caused it. Meaning that they will knock on the electric utility's door and ask for reimbursement (this is essentially subrogation). When the utility goes bankrupt, they're saying we can't pay, so ultimately your insurance carrier pays out of pocket with no reimbursement. The head property underwriter of Everest insurance spoke to us about the fire claims and said they really hurt his book. If I recall, they paid like a billion in fire claims in 2018, but budgeted nowhere near enough. Those well paid actuaries couldn't predict a fire would raze California! Luckily they budget a rainy day fund, so the company was ok. Fire insurance prices did go up significantly the following year. This is because they didn't realize just how on the hook they could be for fire claims. The whole insurance market systematically underpriced fire insurance in fire prone areas.
Crane collapse is another good example. My old client had a particularly nasty crane collapse that is ongoing, so I will not share any details around any crane collapses, hypothetical or not. However, there is an analogous claim that I did not work on that I can use as an example: the MGM shooting in Vegas (2017) [2]. Basically, the concert venue didn't have enough insurance to foot the bill. In the process of discovery, the lawyers saw that MGM Casinos (where the shooter perched) had an extensive casualty insurance tower. MGM's insurance ended up having to pay out the claim. They used up the full limits of every policy they bought that year (and not a penny more). I think because they weren't negligent, the lawyers didn't seek damages beyond their policy limits. When there is a bad claim, lawyers will always find whoever has the deepest pockets and make them pay. If you don't have enough insurance, courts will force you to pay out of pocket. If you don't have enough money out of pocket, the wronged party will have to eat the loss. This is why point #2 is an important reason for buying insurance.
Also- if your question regarding crane collapses is more geared towards someone losing a lot of value quickly, that is easy. My old boss insured a factory in tornado alley. Couple hundred million dollar factory was insured pretty cheap because tornadoes don't cause much damage and are considered low risk. A few weeks after the plant was finished, a tornado came through and ripped the building clean in half. Insurance company paid the near total loss, no questions asked. Remember, they're in the business of insuring against these freak accidents. They are comfortable with taking a lopsided deal. They earn plenty of premiums each year on factories that aren't violently introduced to tornadoes.
I had a wealthy client who purposely didn't buy insurance on his buildings. He'd buy the first $75M or whatever of insurance and would guarantee the rest out of pocket (did I mention he was wealthy?). This is hard to do because of points #2 and #3, but it can be done. In the biz, we call this "self-insurance" and while it may sound like I'm being tongue-in-cheek, it is a very sophisticated risk management strategy that can accomplish a client's risk transfer needs. Typically companies self insure the small claims (via a deductible), not the top end of claims.
I guess to directly answer the lead question, the ultimate insurer without any insurance backing is you, the owner. It's your stuff after all. If your stuff is important to other people (ie the public, or other companies) other stakeholders are gonna make you have insurance, otherwise you won't be allowed to control those resources. That's why the boat, the bridge, and the port all had good insurance. The system was working as intended.
Thank you for your great questions! I've got a few other responses in the thread that detail other insurance questions that you may find interesting.
[1] https://finance.yahoo.com/quote/AIG/balance-sheet/
[2] It's a little fucked up that I have to put the year so we know which one I'm talking about. At least I didn't need to clarify the month...
The way you see the cost is when you go to buy anything new, the price of the item goes up because the background insurance is a little bit higher.
If the insurance is too high, businesses shut, market price goes up and economy slows down, leading the govt to print more money for stimulus which in turn devalues the previous losses, with justified inflation.
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
From "What is Going on With Shipping?"