Tianjin loss uncertain and climbing: Swiss Re

In its sigma study released this week, Swiss Re estimates total insured property loss from the Tianjin explosions at around $2.5bn to $3.5bn. This makes it the largest man-made insured loss event ever recorded in Asia and the third most expensive globally. Swiss Re's loss estimate has already crept up since it released a preliminary figure of $2bn in December. Reinsurance broker Guy Carpenter previously estimated insurance losses from Tianjin, which killed around 170 people, as high as $3.3bn, while the International Union of Marine Insurance (IUMI) said that losses could reach as much as $6bn. The sheer volume of the destroyed and damaged cars, as well as the numerous loss adjustment and adjudication challenges, means that the total insurance loss is in a "state of flux", Swiss Re said in its latest sigma study.hide"Tianjin could ultimately become one of the largest man-made insurance loss events worldwide ever recorded. The event shows the large loss potential in a country like China, with a fast-growing economy," said Swiss Re. The estimated 12,500 new vehicles parked at or near the Tianjin blast site made up most of the insurance claims, according to Swiss Re. Cargo losses appear lower than some feared because many containers were mostly empty. Damage to cargo, warehouses, infrastructure, machinery and equipment account for a much smaller proportion of the losses, Swiss Re said. Business and contingent business interruption, aviation, liability, personal accident and life claims also account for a small portion of the losses, the reinsurer added. The complexity of determining coverage and settling Tianjin claims throws light on some new considerations for large losses, according to Swiss Re. "In particular, the sheer volume of motor vehicles involved turned some simple coverage issues into one of the biggest challenges that the insurance industry has ever faced," it said. The Tianjin explosions have presented insurers with a number of challenges, according to Swiss Re. The imposition of exclusion zones and general lack of access to the site has meant a reliance on forensic accounting and drones to assess losses. The loss also gave rise to some complex coverage issues, in particular around which insureds and policies were liable. "Even though the main loss - to new cars - is known, uncertainties with respect to the types of policies involved remain," Swiss Re said. If vehicles at the site of the explosion were in transit, they would likely be covered by marine insurance policies. But if Tianjin was the final port of destination, with vehicles' next transfer to a point-of-sale in China, claims could come under property insurance. If the transfer is through a local wholesaler or subsidiary, it is even harder to determine whether the manufacturer's cargo policy or the local entity's property or domestic transport policy responds, or whether the two covers overlap, Swiss Re said. The claim cost greatly increases if a car has passed through customs and has paid relevant taxes, but assessing where a vehicle was parked and under who’s liability is not as simple as it may first appear, Swiss Re noted. "It is sometimes difficult to ascertain which entity held title to the parked vehicles at the time of the explosions and, accordingly, whether the loss falls under the marine cargo or property insurance policies taken out," it added. So far, it looks as if the majority of vehicle claims in Tianjin fall under property insurance, mostly arising from high value imported cars at the onshore storage stage of their journey to market, noted Swiss Re.

Tianjin loss uncertain and climbing: Swiss Re

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