The rising costs from the vessel which destroyed a vital bridge outside the port of Baltimore has opened new discussions in the protection & indemnity insurance market over changes to its complex reinsurance programme.

Boker Gallagher has issued its P&I market – mid-year review which found the 2025/26 year of account delivered a market-wide underwriting loss of $250 million with an average market financial year combined ratio of between 105 and 108%.

However, P&I club’s free reserves have risen to $6.8 billion, an increase of $850 million. Most of this is a result of trading, but the UK Club added $31 million to its reserves as a result of group restructuring.

The broker added pool retained losses for 2025-26 were a shade over $300 million, below the recent eight-year average, but it is to be expected that this figure may increase during the coming 12 months.

Looming  large has been the costs arising from the major incident in which the container ship MV Dali lost electrical power and collided with a support column, causing the catastrophic collapse of the Francis Scott Key Bridge in Baltimore and killing six road construction workers, in March 2024.

The report explained: “The MV Dali casualty, is now the biggest single marine casualty to hit the market. The casualty is now reserved at in excess of $2.8 billion, the bulk of which has fallen on the excess reinsurance market — the IG Clubs’ collective exposure being the first $100 million and potentially the exhaustion of the $107 million annual aggregate deductible, subject to the impact of other qualifying losses”.

The bulk of the loss has fallen on the commercial market, and Gallagher added the claim has also exhausted the group reinsurance limit and is currently ‘in’ the collective overspill layer.

“Technically, therefore, the claim is already an overspill claim, but one which would not trigger an overspill call because of the existence of the collective overspill protection,” The report added. “The casualty remains highly complex and continues to develop. While the claim has prompted discussion around collective overspill protection, free reserves and potential funding considerations, ultimate outcomes remain uncertain and will depend on final claim development, reinsurance recoveries, and individual club decisions.

“Based on currently available market information, approximately $300 million of collective overspill protection remains available. As the MV Dali casualty continues to progress, the ultimate quantum of the claim and the extent of reinsurance recoveries remain uncertain.

“As a result, the loss has prompted broader discussion across the market regarding the operation of the International Group’s overspill arrangements and the role of club capital in responding to exceptional claims. The discussion is particularly relevant given the strong capital position of the International Group clubs, which collectively hold significant free reserves.

“While any funding decisions would be a matter for individual club boards and subject to the specific circumstances at the time, the casualty has highlighted the importance of understanding how the various layers of protection and capital resources are intended to operate in the event of an extreme loss. As no overspill call has previously been levied, the case has also generated interest as a practical example of how these long-established arrangements could function under a severe but real-world claims scenario.

“The above scenario has been further complicated by reports that a reinsurer who had originally failed to respond to the claim on the collective overspill reinsurance protection, to the amount of $180 million.

“The Clubs are understood to have temporarily funded this shortfall in recovery on behalf of their members, confident that the amount in question will ultimately prove collectable. We now understand that the reinsurer in question has agreed to cover the claim.

“These circumstances illustrate the strategic importance of the $6.8 billion of free reserves available across the International Group clubs.”

Looking to the 2027/28 renewals in February Gallagher said competition remains significant.

“Notwithstanding the substantial positive overall result witnessed last year, there are still issues with regard to underwriting rates and profitability at most clubs,” Gallagher added. “This would suggest that most Clubs may look to seek further premium increases to try to reach target combined ratios of 100% or less. We would expect to see an average general increase of a shade under 5% sought –  although this may simply be enough to cover claims inflation and not enhance combined ratios. Some Clubs may seek a little more, and some may be more generous to members – so a range of 2.5% to 5% is the most likely outcome.

“There could be more pressure on Clubs to provide commercial-level capital returns as part of the renewal discussions.”