The insured losses from a series of explosions at a chemical warehouse in the port area of Tianjin on 12 August could result in insurance losses exceeding US$1.5 billion according to initial estimates.
The high insurance penetration rate in the area could make the blasts one of the most costly catastrophe claims for the Chinese insurance sector in the last few years, said Fitch Ratings, adding that the insured losses are likely to be material, potentially exceeding US$1-1.5 billion.
A Reuters report citing a Credit Suisse analyst also said that the insured losses from the event is “likely to be large with initial insured loss estimates of US$1-1.5 billion and a large number of insurance companies affected”.
Losses could represent 88% of direct premiums
According to the CIRC, non-life insurance premiums from Tianjin city amounted to CNY11 billion (US$1.72 billion) in 2014.
As such, should insured losses come in at the high end of the initial US$1-1.5 billion estimate, they would represent about 88% of total direct premiums written in Tianjin or roughly 5.4% of aggregated shareholder capital for the six most active issuers at end-2014, said Fitch.
PICC Property and Casualty Company, Ping An Property & Casualty Insurance Company of China, China Pacific Property Insurance, China Continent Property & Casualty Insurance, Sunshine Property & Casualty Insurance and Taiping General Insurance are the most active insurers in the region, accounting for more than 77% of the non-life segment as measured by direct premiums written.
Insurance companies including Zurich Insurance Group AG and Allianz said they had received claims from clients that had been affected by the disaster but could not provide any estimate of the potential losses. Several Chinese insurers have also said that they are receiving claims.
“Transport insurers are looking at the damage to containers, warehouses and new cars but also to the port’s infrastructure of trains, cranes and rail tracks,” Mr Dieter Berg, a marine expert at the world’s largest reinsurer, Munich Re, told Reuters.
“In ports, we have a massive concentration of high value (goods) which makes it hard for insurers to make exact risk assessments.”
The number of new cars damaged by the blasts could climb above 10,000 when accounting for all the vehicles in area as automakers struggle to assess the damage as authorities restrict access. The deadly incident has claimed 114 lives and injured more than 700. Scores remain missing. The radius of the blasts was at least 4 km.
Insurers will also face business interruption claims as several factories and companies and freight firms have suspended operations. For example, Toyota, Japan’s biggest car group, said it was suspending production in Tianjin for a few days.
The catastrophe has affected 17,000 households and 1,700 enterprises, according to Mr Zhang Ruigang, Vice Head of the Binhai New Area where the stricken port is located, state-run Xinhua reported. Binhai New Area is a flagship industrial park that has made Tianjin one of China’s fastest growing areas.