China’s homegrown insurers will likely face the bulk of the financial losses from massive explosions at a chemical storage site in Tianjin earlier this month. What’s more, the claims could hurt, Fitch Ratings estimated in a new report.

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 6 most active insurers in Taijin and handle more than 77 percent of the non-life segment as measured by direct premiums written, Fitch said.

Fitch Ratings said the insured losses from the Aug. 12 explosion could hit between $1 billion and $1.5 billion. Also, Fitch, citing numbers from the China Insurance Regulatory Commission, estimated non-life insurance premiums from Tianjin hit $1.7 billion in 2014. With that in mind, Fitch said that insured losses, if they came in at the $1.5 billion figure, would reflect about 88 percent of total direct premiums written in the district, or about 5.4 percent of aggregated shareholder capital for the six most active insurers at year-end 2014.

“Fitch believes that claims from the blasts are likely to undermine the financial performance of some regional players and those property/casualty insurers with high risk accumulation in the affected area,” the ratings entity said. It added, however, that is too early to determine how the explosion will affect “the credit strength of the Chinese insurance sector as a whole.”

China’s insurers won’t be the only ones dealing with explosion-related losses. Carriers including Zurich Insurance Group, Munich Re and Swiss Re told Bloomberg that they’re still assessing damages. Allianz said the blast will create some losses, but won’t make much of an impact overall.

Fitch said that claims from the blast could be shared with both local and international insurers, which could end up dampening the impact it has on the Chinese insurance sector.

As Fitch noted, the damages were widespread, including damage from the explosion of more than 8,000 vehicles. Fitch said that motor insurance-related claims could harm insurers’ margins and their capital if they maintain marginal reinsurance protection and the “degree of risk accumulation within the affected region is significant.”

Fitch said Chinese insurers typically use quote share reinsurance treaties to minimize their solvency strains stemming from robust growth of the motor insurance book of business.

Most claims will end up coming from motor, cargo, liability and property insurance, Fitch said. But medical and life insurance claims will also likely be significant.

Source: Fitch Ratings