Tag Archives: Man-made Disasters

Tianjin: A Reminder of Insurance Need in Developing Countries

The explosions at the Port of Tianjin, China could ultimately become one of the largest man-made insurance loss events worldwide ever recorded, according to Swiss Re sigma.

Based on Swiss Re’s latest estimates, the total insured property loss of the Tianjin explosions is likely to be around USD 2.5 billion to USD 3.5 billion, making it the largest man-made insured loss event in Asia ever recorded.

Tianjin currently ranks as the third largest man-made insured global loss (in 2015 dollars), behind the September 11, 2001, terrorist attacks in New York, Washington and Pennsylvania and the 1988 Piper Alpha oil rig disaster.

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The Tianjin experience highlights the new potential risks facing developing countries with rapidly-developing economies, according to the latest sigma study.

2015 was the third year in a row that the biggest man-made loss globally originated from an emerging market, a reminder of the importance of insurance for developing countries, sigma says.

“The event shows the large loss potential in a country like China, with a fast-growing economy. If further evidence is needed, in 2013 a fire at a major high-tech semiconductor plant in Wuxi, also in China, caused insured losses of USD 0.9 billion.”

Financial protection through insurance is key to restoring business operations and recouping losses, sigma notes.

Accurate assessment of exposures, appropriate coverage terms and adequate pricing are likewise crucial:

“For re/insurers, they need to actively identify monitor and manage exposures in hazard zones and in areas with high asset-value concentrations.”

The complexities of the Tianjin loss have challenged re/insurers, and highlighted the accumulation of risks that can arise from a single large-scale industrial catastrophe event.

While destroyed and damaged vehicles account for most of the Tianjin losses, uncertainties remain as to the types of insurance policies involved.

Property and cargo present major risk accumulation factors in ports, especially in big centers like Tianjin, sigma observes.

The Insurance Information Institute has useful facts and statistics on man-made disasters here.

Man-made Disasters and 2013

Just $6 billion of the $44 billion in estimated insured global losses arising from catastrophes in 2013 were generated by man-made disasters, little changed from 2012, according to Swiss Re sigma preliminary estimates.

But as an article on the Lloyd’s website reports, even though natural catastrophes may have dominated the news headlines in 2013, a series of man-made disasters have had a significant impact on a number of communities.

In fact around 5,000 lives were lost as a result of man-made disasters in 2013, according to Swiss Re sigma estimates.

Lloyd’s explains that with so many different parties potentially affected by man-made catastrophes, the claims scenarios for insurers can be complex, often involving property, first and third party liability losses.

Major man-made disasters in 2013 include the massive explosion at a fertilizer plant near the town of West, Texas, in April, which caused around $100 million in insured property losses, according to Lloyd’s.

Two rail disasters, one in Canada and the other in Spain, also made headlines in July.

On July 6, 2013, an unattended 74-car freight train carrying crude oil ran away and derailed in the town of Lac-Megantic, Canada, resulting in a fire and explosion that left as many as 50 people dead and destroyed half the downtown area.

Later that month, on July 24, 2013, a high speed train derailed outside the railway station of Santiago de Compostela, Spain, leaving around 140 injured and 79 dead.

Check out I.I.I. facts and statistics on man-made disasters.

The September 11 terrorist attack in the U.S. was the costliest man-made disaster in history, based on Swiss Re data going back to 1970. It caused $24 billion in insured losses (in 2012 dollars).

Texas Fertilizer Plant Explosion

Media reports over the weekend suggest some residents were allowed back to their homes days after a Texas fertilizer plant explosion left 14 dead and  more than 160 injured.

A fire last Wednesday at the fertilizer plant in West, Texas, some 80 miles southeast of Dallas,  triggered the deadly explosion, though investigators have yet to pinpoint the exact cause.

The United States Geological Survey (USGS) recorded the explosion as a 2.1-magnitude tremor.

GCCapitalIdeas has  a  summary  of the event here.

Satellite images on the PHOTOblog at NBC news via DigitalGlobe show West, Texas before and after the explosion. More than 150 buildings were damaged or destroyed in the explosion.

Business Insurance reports that in the wake of the disaster, questions about risk management planning adequacy and insurance coverage abound.

It quotes Joe Woods, vice president of state government relations for the Property Casualty Insurers Association of America, saying that the incident could trigger a broad range of insurance coverage that includes commercial property, business interruption, third-party liability, health and personal lines.

PC360 also reports on the insurance implications of the event here.

Check out I.I.I. facts and statistics on man-made disasters.