Some industry watchers are trying to tally carrier claims costs following an Aug. 12 explosion at a key China port. A.M. Best cautions, however, that plenty of variables remain. Among them: the mass evacuation of nearby residents who have yet to assess the damage that hit them.
“Various market sources have started to come up with insured loss estimates,” A.M. Best said in an Aug. 21 briefing regarding the explosion of a toxic chemical warehouse at Tianjin. “Those estimates are subject to uncertainty as residents within three kilometers of the blast site have been evacuated. Direct insurers and their policyholders are still not allowed to inspect on-site the extent of loss damage.”
Fitch Ratings estimated earlier this month that China’s own insurers would face the bulk of the financial losses from the Tianjin explosion. Six China companies are the most active insurers in Tianjin and handle more than 77 percent of the non-life segment as measured by direct premiums written, Fitch said. Fitch also estimated insurers losses could hit between $1 billion and $1.5 billion.
A.M. Best won’t venture a detailed estimate until evacuated residents can deal with on-site inspections and file claims. But the ratings entity believes property damage claims will be the biggest part of overall insured losses. This includes property and content losses at or near the blast site, stemming from commercial property policies, plus thousands of new motor vehicles parked nearby that sustained damage from the resulting explosion and fire.
Other claims are likely as far as business interruption loss and marine cargo. As for the later coverage option, A.M. Best said that it will take time for claims stemming from damaged shipping containers to be reported and inspected by insurance companies.
A.M. Best said that local reinsurers and insurers in China will be impacted by the explosion, as well as some regional insurers and reinsurers through inward reinsurance treaties and facultative placements.
A.M. Best placed the financial strength and issuer credit ratings of two China insurers under review with negative implications due to potential Tianjin-related losses. Hyundai Insurance and Aioi Nissay Dowa Insurance (China) Company Limited’s A- (Excellent) and issuer credit rating of “a-” are at risk.
Source: A.M. Best