UPDATE: Tianjin Blast Claims Could Top Estimates, Strain Chinese Insurers

Insurance claims from the devastating explosions at the Chinese port of Tianjin last week could exceed initial estimates and strain the finances of regional insurers, credit ratings agency Fitch said on Tuesday.

Credit Suisse analysts estimated that total insurance losses could amount to $1 billion to $1.5 billion, basing their calculations on Chinese media reports, but Fitch said the bill could be higher.

Local Chinese insurers are likely to bear the brunt of the costs and it is unclear how much of their exposure will be transferred to reinsurance companies.

“The high insurance penetration rate in this area could make the blasts one of the most costly catastrophe claims for the Chinese insurance sector in the past few years,” Fitch said.

“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.”

It was too early to say how the credit strength of China’s insurance sector as a whole would be affected, it added.

If claims were to come in at the high end of the forecast, it would represent more than 5 percent of aggregated shareholder capital of the six leading insurers with exposure to Tianjin, Fitch estimated.

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, Fitch said. They account for nearly 80 percent of property and casualty premiums.

Property and casualty insurers in the region typically pass on about 10-15 percent of risks to local and international reinsurers, Fitch said.

China Reinsurance Group, which this month applied to carry out an initial public offering, is the country’s biggest reinsurer, but other top spots in the market are occupied by European players Swiss Re, Hannover Re, Munich Re and SCOR.

Reinsurance officials on Tuesday said it was too early to comment on the likelihood or extent of claims their insurance company clients might pass along.

“A potential participation (in the claims) is possible,” a Hannover Re spokeswoman said.

Zurich Insurance and Allianz are among the foreign insurers who have received claims stemming from the blasts on Wednesday, which killed more than 100 people and destroyed or damaged about 10,000 cars at Tianjin, the world’s third-largest port by cargo volume.

The IUMI marine insurance body said that losses on motor vehicles alone in Tianjin could amount to $300 million.

“Container losses are likely to be spread among many marine cargo insurers but motor vehicle insurance is a specialist sector and so that market is likely to be hit hard,” said Nick Derrick, chairman of the IUMI’s cargo committee.

(Additional reporting by Elzio Barreto in Hong Kong; editing by Thomas Atkins and David Goodman)