Insurers grapple with growing Tianjin blast losses
The explosion and subsequent blaze that hit the chemical storage facility in the port of Tianjin, China, in August, seems destined to be a big talking point at SIRC this week as re/insurers continue to grapple with the potential scale of the loses from the disaster.
It’s a hugely complex loss—and could grow to become the largest manmade loss in history in Asia. This has made it hard for re/insurers to establish the true scale of the losses.
The fireball and shock wave from the explosions blasted shipping containers, incinerated vehicles and destroyed warehouses, production facilities and dormitories. It also damaged the nearby Donghai Road railway station and blew out windows within residential structures for several kilometres.
A report by Guy Carpenter, which suggested the loss will ultimately be considered one of the most complex claims in recent history, estimated the final loss will be between $1.6 billion and $3.3 billion.
“The explosions that occurred in Tianjin, China are likely to constitute one of the largest insured manmade losses to date in Asia and will certainly be considered one of the most complex insurance and reinsurance losses in recent history,” said James Nash, chief executive officer of Asia-Pacific operations for Guy Carpenter.
Meanwhile, rating agency Fitch, in an earlier loss estimate, suggested the blast could cost Chinese insurance companies $1.5 billion.
The rating agency explained that the high insurance penetration rate in the area could make the blasts one of the costliest catastrophe claims in the Chinese insurance market in the last few years.
“Claims from the blasts could be shared with both local and international reinsurers, which could mitigate the direct impact on the Chinese insurance sector,” said the rating agency.
“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 programme are likely to determine the degree of severity to which they are affected.”
Individual re/insurers have started to bring out their own loss estimates, all stressing, however, that due to the complexity and inherent uncertainties of the event, this may be subject to change.
Asia Capital Re has estimated its net loss to be approximately $26 million. The company said its ultimate net loss from the Tianjin incident is likely an earnings event well within the expected volatility inherent in its portfolio.
Allied World’s third quarter results were hit by the explosion. The firm reported a net loss of $51.6 million for the third quarter compared with net income of $30.9 million for the third quarter of 2014, in part thanks to $28.9 million of losses from the explosions.
XL Group has estimated it accumulated $100 million of preliminary losses from the explosions. The firm said 30 percent of these pre-tax losses are attributable to the insurance segment and 70 percent affect the reinsurance segment.
Aspen Insurance has estimated it incurred pre-tax losses of $30 million from the explosion. It said it has based its estimates primarily on market information and exposure analysis, among other factors, due to the absence of significant client loss reporting.
PartnerRe has estimated its losses relating to the explosion will be between $50 million and $70 million pre-tax and net of retrocession and reinstatement premiums.
These losses will be recorded in the company’s third quarter 2015 results, and recorded in PartnerRe’s global property/casualty, specialty, catastrophe, and North America sub-segments, it said.
Finally, Validus Holdings estimated that its losses relating to a combination of the explosion at the port of Tianjin and the earthquake in Chile on September 16, could reach $63.9 million.
