Two massive explosions in a warehouse in the Chinese port have killed more than a hundred people, left hundreds more injured and devastated large parts of the city
August 21, 2015: Insured losses from the explosions that rocked the Chinese port of Tianjin on August 12 could rise to over $1.5 billion making it one of the costliest man-made disasters in the country’s history.
The two massive explosions have killed more than a hundred people, left hundreds more injured and devastated large parts of the city. The largest explosion packed the same amount of firepower as 21 tons of TNT.
They took place at a warehouse, which contained hazardous and flammable chemicals, including calcium carbide, sodium cyanide, potassium nitrate, ammonium nitrate and sodium nitrate.
According to figures from Fitch Ratings, insured losses could be in the range of $1-$1.5 billion. The agency noted that the high insurance penetration rate in this area could make the blasts one of the most costly catastrophe claims for the Chinese insurance sector with the number of reported insurance claims cases to surge further in the coming few weeks.
In a statement, it said: “Fitch believes that claims from the blasts are likely to undermine the financial performance of some regional players and those property and casualty insurers with high risk accumulation in the affected areas. That said, it is too early to determine the exact impact that this incident will have on the credit strength of the Chinese insurance sector as a whole.”
According to the China Insurance Regulatory Commission, non-life insurance premiums from Tianjin city amounted to 11 billion yuan ($1.7 billion) in 2014.
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.
Fitch added: “Claims from the blasts could be shared with both local and international reinsurers, which could mitigate the direct impact on the Chinese insurance sector. While insurers could recover a portion of their property claims from their reinsurers; their exposure, the amount of retention and the number of reinstatements under the catastrophe reinsurance program are likely to determine the degree of severity to which they are affected.”
The majority of claims will come from motor, cargo, liability and property insurance. However, medical and life insurance claims are also likely to be substantial.
Victims of death and injuries are covered by a government-supported accident insurance plan for the Tianjin region, in addition to their own medical and life insurance policies. Chinese media have reported that the explosions destroyed over 8,000 vehicles.
The pharmaceutical industry will be particularly badly hit as Tianjin’s BinHai New Area serves as a key manufacturing hub for the sector in China. Pharma majors GlaxoSmithKline, Novo Nordisk and Servier have sites close to the blast. GSK says the explosion has affected its Tianjin operation.