An explosion and fire that devastated the Chinese port of Tianjin could cost the insurance industry more than USD2 billion, its estimated bill from the Costa Concordia, according to ISA Surveys.
For the Tianjin disaster, the marine cargo surveyor estimates that motor losses alone will top USD300 million.
About 18,000 containers at the port are said to have been completely destroyed, while other cargo has reportedly been heavily contaminated by toxic dust.
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It is feared that rainfall before the clean-up operation is completed could cause cyanide stored in the warehouse where the explosion occurred to create a cloud of highly toxic gas. Chinese authorities have restricted access to the affected area and evacuated surrounding homes and offices.
This lack of access is hampering efforts by loss adjusters and insurance underwriters to establish the disaster’s likely cost. While underwriters in the London market and the international reinsurance markets are braced for major losses, many are unsure how much these could total, also due to the current lack of claims.
A complex web of claims payments is likely to ensue as insurers seek to recover costs from the insurer of the warehouse. Yet its coverage will probably be far lower than the amount claimed by underwriters, leaving insurers to pay claims with little hope of further recovery.
The loss of an estimated 10,000 motor vehicles is likely to have a heavy impact on insurers in the specialist cargo market for the transport of motor vehicles, as only a handful of insurers and reinsurers cover such risks.
A London market underwriter told IHS Maritime that the catastrophe could prove “market-changing” and said a cost in excess of USD2 billion is “certainly more than possible”.
“It remains to be seen if this figure will include the insured commercial property damage and business interruption covers from affected firms,” said the underwriter.
“However, the marine market across all classes is facing a major manmade catastrophe claim and the cargo market may well be facing a claim level that matches that which resulted from Superstorm Sandy. It is likely to be a market-changing event due to its scale and underwriters will certainly be looking at better managing their future accumulation risks.”