Personal Finance

Baltimore bridge collapse could yield the largest maritime insurance losses

Published

11 months ago

April 10, 2024

The Baltimore bridge collapse could cost up to $4 billion in insured losses, which would make it the most expensive incident involving a ship collision for insurers in modern history.

The crash of the Dali container ship into the Francis Scott Key Bridge last month killed six workers and demolished the structure. It wasn’t the deadliest maritime disaster, but the lengthy closure of the Port of Baltimore and larger insurance purchases by shipping companies aiming to protect against supply chain disruptions and global conflicts could send the final tally soaring.

“This is the biggest claim that we’ll likely see in marine insurance,” said Brian Schneider, senior director at Fitch Ratings’ North American insurance rating arm, who expects the final total to come in between $2 to $4 billion in insured losses.

That could make it more expensive than the capsizing of the Costa Concordia in 2012, Schneider said. In that case, a multistory cruise liner carrying more than 4,000 passengers and crew ran aground and capsized off Italy’s west coast, killing 32 people, which ended up costing $2 billion — the costliest maritime disaster so far.

The company responsible for paying the insurance losses for the bridge damage and negligence of the Dali is International Group of P&I Clubs, which also has reinsurance that provides marine liability coverage to the Dali. This insurance policy will cover damage to the bridge, as well as wreck removal, loss of life and negligence of the Dali.

Repairing or replacing the bridge will be expensive, as the price of steel has been going up, said David Osler, insurance editor at Lloyd’s List, a shipping news company.

“It will take a heck of a lot of steel to repair that bridge,” Osler said.

The hull damage, pollution and cargo losses were insured separately in the market as property coverage. Generally, most shippers also get a separate insurance product to cover business interruption, which could be add to the losses, given the busy Port of Baltimore. It’s not confirmed at this point if the shippers or the Dali have business interruption insurance.

“The Port of Baltimore is the busiest port for car shipments in the U.S.,” said Schneider of Fitch. “That could impact a lot of business-interruption policies, such that there will be liability for all the shipping that is not taking place now.”

Rating agency Morningstar DBRS said the losses will add to the woes of marine insurers, who have been facing a number of serious challenges in recent years. The pandemic, the war in Ukraine, piracy in the Horn of Africa and Gulf of Yemen, and a string of attacks from Houthi militants in the Red Sea have created a “perfect storm” causing the shipping industry to buy more insurance, experts said.

“The trade interruptions caused by the pandemic have meant that shippers have become more aware of the need to have supply chain insurance, which is a relatively new product,” said Marcos Alvarez, head of insurance at the ratings firm DBRS Morningstar.

The Panama Canal is taking longer to cross because of some drug trade issues, Alvarez said. And the Red Sea piracy issues are diverting 80 percent of traffic south of Africa, adding 10 to 14 days to trips, “meaning more costs, more fuel, more insurance,” Alvarez said.

Apart from the added value of the journeys, some shippers are also adding insurance to protect against a phenomenon known as “social inflation” — in which juries hand out more generous payouts to those who bring claims for negligence and escalating settlement awards, insurance experts say.

The families of the six bridge workers who died in the crash are expected to file a lawsuit over the incident, Alvarez said.

“There will be worker compensation lawsuits, there will be life insurance settlements, and, of course, the boat insurance will be in play,” he said. “And this is happening in one of the most litigious jurisdictions in the world, the U.S.”

One possible reprieve for insurers could come from a little-known maritime law from 1851 called the Limitation of Liability Act, which caps the ship’s liability to the post-accident value of the boat and its cargo. The owners of the Titanic used this law to limit how much they were forced to pay out after the ship sank in 1912. That same law could cap how much insurers have to pay for the damage to the boat itself. However, the liability cap probably won’t hold down insurance payouts for the bridge or the interruption of business for the port or for other shippers, Alvarez said.

Personal Finance

Social Security plans to cut about 7,000 workers. That may affect benefits

Published

8 hours ago

March 3, 2025

Business Finance News

The Social Security Administration office in Brownsville, Texas.

Robert Daemmrich Photography Inc | Corbis Historical | Getty Images

The Social Security Administration plans to shed 7,000 employees as the Trump administration looks for ways to cut federal spending.

The agency on Friday confirmed the figure — which will bring its total staff down to 50,000 from 57,000.

Previous reports that the Social Security Administration planned for a 50% reduction to its headcount are “false,” the agency said.

Nevertheless, the aim of 7,000 job cuts has prompted concerns about the agency’s ability to continue to provide services, particularly benefit payments, to tens of millions of older Americans when its staff is already at a 50-year low.

“It’s going to extend the amount of time that it takes for them to have their claim processed,” said Greg Senden, a paralegal analyst who has worked at the Social Security Administration for 27 years.

“It’s going to extend the amount of time that they have to wait to get benefits,” said Senden, who also helps the American Federation of Government Employees oversee Social Security employees in six central states.

Officials at the White House and the Social Security Administration were not available for comment at press time.

The Social Security Administration on Friday said it anticipates “much of” the staff reductions needed to reach its target will come from resignations, retirement and offers for Voluntary Separation Incentive Payments, or VSIP.

More reductions could come from “reduction-in-force actions that could include abolishment of organizations and positions” or reassignments to other positions, the agency said. Federal agencies must submit their reduction-in-force plans by March 13 to the Office of Personnel Management for approval.

Cuts may affect benefit payments, experts say

Former Social Security Administration Commissioner Martin O’Malley last week told CNBC.com that the continuity of benefit payments could be at risk for the first time in the program’s history.

“Ultimately, you’re going to see the system collapse and an interruption of benefits,” O’Malley said. “I believe you will see that within the next 30 to 90 days.”

Other experts say the changes could affect benefits, though it remains to be seen exactly how.

“It’s unclear to me whether the staff cuts are more likely to result in an interruption of benefits, or an increase in improper payments,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University and a former public trustee for Social Security and Medicare.

Improper payments happen when the agency either overpays or underpays benefits due to inaccurate information.

Top Social Security official exits after refusing DOGE access to sensitive data

With fewer staff, the Social Security Administration will have to choose between making sure all claims are processed, which may lead to more improper payments, or avoiding those errors, which could lead to processing delays, Blahous said.

Disability benefits, which require more agency staff attention both to process initial claims and to continue to verify beneficiaries are eligible, may be more susceptible to errors compared to retirement benefits, he added.

Cuts may have minimal impact on trust funds

Under the Trump administration, Social Security also plans to consolidate its geographic footprint to four regions down from 10 regional offices, the agency said on Friday.

Ultimately, it remains to be seen how much savings the overall reforms will generate.

The Social Security Administration’s funding for administrative costs comes out of its trust funds, which are also used to pay benefits. Based on current projections, the trust funds will be depleted in the next decade and Social Security will not be able to pay full benefits at that time, unless Congress acts sooner.

The efforts to cut costs at the Social Security Administration would likely only help the trust fund solvency “in some miniscule way,” said Andrew Biggs, senior fellow at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration.

What President Donald Trump is likely looking to do broadly is reset the baseline on government spending and employment, he said.

“I’m not disagreeing with the idea that the agency could be more efficient,” Biggs said. “I just wonder whether you can come up with that by cutting the positions first and figuring out how to have the efficiencies later.”

Personal Finance

Student loan borrowers pursuing PSLF are ‘panicking.’ Here’s what to know

Published

9 hours ago

March 3, 2025

Business Finance News

Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

As the Trump administration overhauls the student loan system, many borrowers pursuing the Public Service Loan Forgiveness program are worried about its future.

“There’s a lot of panicking by PSLF borrowers due to the uncertainty,” said higher education expert Mark Kantrowitz.

PSLF, which President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.

Here’s what borrowers in the program need to know about recent changes affecting the program.

IDR repayment plan applications down

Some borrowers’ PSLF progress has stalled

While the legal challenges against SAVE were playing out, the Biden administration paused the payments for enrollees through a forbearance, as well as the accrual of any interest.

Unlike the payment pause during the pandemic, borrowers in this forbearance aren’t getting credit toward their required 120 payments for loan forgiveness under PSLF. It’s unclear when the forbearance will end.

But while the applications for other IDR plans remain unavailable, borrowers in SAVE are stuck on their timeline toward loan forgiveness, Kantrowitz said. If you were on an IDR plan other than SAVE, you will continue to get credit during this period if you’re making payments and working in eligible employment.

The Education Department is now tweaking the applications to make sure all their repayment plans comply with the new court order, an agency spokesperson told CNBC last week.

It will likely be months before the Department has reworked all the applications and made them available again, Kantrowitz said.

Those who switch to the Standard plan will continue to get PSLF credit, but the payments are often too high for those working in the public sector or for a nonprofit to afford, experts said.

‘Buy back’ opportunity can help

While it’s frustrating not to be inching toward loan forgiveness for the time being, an option down the road may help, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

The Education Department’s Buyback opportunity lets people pay for certain months that didn’t count, if doing so brings them up to 120 qualifying payments.

For example, time spent in forbearances or deferments that suspended your progress can essentially be cashed in for qualifying payments.

The extra payment must total at least as much as what you have paid monthly under an IDR plan, according to Studentaid.gov.

Borrowers who’ve now been pursuing PSLF for 10 years or more should put in their buyback request sooner than later, Kantrowitz said.

“The benefit is likely to be eliminated by the Trump administration,” he said.

Keep records

Borrowers have already long complained of inaccurate payment counts under the PSLF program. While the student loan repayment options are tweaked, people could see more errors, Kantrowitz said.

“A borrower’s payment history and other student loan details are more likely to get corrupted during a transition,” he said.

As a result, he said, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov.

“It would also be a good idea to create a spreadsheet showing all of the qualifying payments so they have their own count,” Kantrowitz said.

With the PSLF help tool, borrowers can search for a list of qualifying employers and access the employer certification form. Try to fill out this form at least once a year, Kantrowitz added.

Personal Finance

Treasury Department halts enforcement of BOI reporting for businesses

Published

12 hours ago

March 3, 2025

Business Finance News

The US Treasury building in Washington, DC, US, on Monday, Jan. 27, 2025.

Stefani Reynolds | Bloomberg | Getty Images

The U.S. Department of the Treasury on Sunday announced it won’t enforce the penalties or fines associated with the Biden-era “beneficial ownership information,” or BOI, reporting requirements for millions of domestic businesses.

Enacted via the Corporate Transparency Act in 2021 to fight illicit finance and shell company formation, BOI reporting requires small businesses to identify who directly or indirectly owns or controls the company to the Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

After previous court delays, the Treasury in late February set a March 21 deadline to comply or risk civil penalties of up to $591 a day, adjusted for inflation, or criminal fines of up to $10,000 and up to two years in prison. The reporting requirements could apply to roughly 32.6 million businesses, according to federal estimates.

The rule was enacted to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.

In addition to not enforcing BOI penalties and fines, the Treasury said it would issue a proposed regulation to apply the rule to foreign reporting companies only.

President Donald Trump praised the news in a Truth Social post on Sunday night, describing the reporting rule as “outrageous and invasive” and “an absolute disaster” for small businesses.

Other experts say the Treasury’s decision could have ramifications for national security.

“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” Scott Greytak, director of advocacy for anticorruption organization Transparency International U.S., said in a statement.

Greg Iacurci contributed to this reporting.