Tianjin explosions will cost insurer up to $70 million in losses

The Chinese blasts that rocked the port city earlier this year will cost leading insurer PartnerRe between $50 million and $70 million, the company confirmed.

Catastrophe & Flood

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The explosions that rocked the Chinese port city of Tianjin in August will cost lead insurer PartnerRe between $50 million and $70 million, the company confirmed this week.

These losses are pre-tax, and net of retrocession and reinstatement premiums. They will be recorded in PartnerRe’s third quarter 2015 results in the global, property/casualty, specialty, catastrophe and North America sub-segments.

The estimate is based on information received to date from PartnerRe’s cedants, as well as analysis of its exposures.

“There is considerable uncertainty associated with any loss estimate,” the company said in a statement. “The ultimate loss, therefore, may differ materially from the current estimate.”

The blasts, which destroyed a number of buildings and goods while releasing toxic chemicals in the air, are expected to cost insurance carriers a total of $1 billion to $1.5 billion in insured losses, according to an analysis from Credit Suisse.

In fact, the bill may be so high, it could seriously shake the financial strength of affected carriers.

“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 areas,” ratings agency Fitch said in a release.

The increased costs will likely be directed toward local Chinese insurers, particularly those insuring businesses who have been forced to halt operations in the days following the explosions.

Prominent companies like electronics firm Panasonic, logistics firm Singamas Container Holdings and agricultural machinery producer Deere & Co. are among those who have temporarily closed up shop. Additionally, Japanese auto manufacturer Toyota confirmed that more than half of its China production capacity would be affected through the week, and the company has suspended production lines in Tianjin that produce up to 530,000 vehicles a year.

Toyota plans to divert shipments from Tianjin to the ports of Shanghia and Dalian in response to the Tianjin problems, which will cost the manufacturer – and ultimately its insurer – a great deal.

The two explosions, which originated in a warehouse containing dangerous sodium cyanide, were said to have generated power equivalent to 3 and 21 tons of TNT. More than 100 people were killed and 700 injured in the blasts.

Tianjin is one of China’s largest cities, with a population of 11.5 million, and is the third largest industrial and transport hub in the world.
 

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