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Explosion in China shows how Cats can have regional, even global, impact: Munich Re


August 17, 2015   by Canadian Underwriter


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The catastrophe in China – where explosions Aug. 12 brought to ruin many facilities in the Port of Tianjin – shows “the persistent growth of accumulation risks, particularly in highly industrialized regions,” suggested Dieter Berg, head of department business development, marine global partnership at Munich Re.

RMS noted in a statement Friday that the two explosions had killed at least 50 people, “reducing buildings to burnt-out shells and destroying over 1,500 newly manufactured cars.” Photo: @NBCLA

“We as reinsurers have observed again and again over the past years how such individual events can have regional, or even global impact,” Berg told Munich Re’s publication, Topics Online. As part of a post Aug. 14, he cited as examples, the destruction of a power plant on Cyprus in 2011, which had an impact on the national economy, and the Thailand floods, also in 2011.

Asked how marine insurers model such losses, Berg advised that losses from explosions “are difficult to model, but are comparable to modelling terrorism losses. For large port facilities, we, thus, analyze not only natural hazards such as flooding, earthquake or hail, but also this type of scenario.”

He noted that for insurers and reinsurers alike, “it is always important here to generate optimum risk information on the values of goods and accumulations exposure in ports. On the basis of this, we can calculate worst-case scenarios, to identify (and, if required, limit) our own risk exposure, on the one hand, and, at the same time, adequately incorporate such very large loss scenarios into the premium calculation.”

Berg pointed out “the large-scale container storage facilities in terminals or goods in warehouses create enormous accumulations of goods and values in ports,” but added, “again and again, losses are caused by human beings, particularly around industrial facilities.”

With Tianjin being the third largest port worldwide – and the 11th largest container port in the world – many warehouses, thousands of containers and new cars in car depots have been destroyed, he reported.

Reuters reported last Friday that the Chinese units of European insurers Allianz and Zurich Insurance Group had received claims for unspecified damages from customer companies in Tianjin after two massive explosions in the port.

RMS noted in a statement Friday that the two explosions had killed at least 50 people, “reducing buildings to burnt-out shells and destroying over 1,500 newly manufactured cars.” It was reported that the worst of the damage occurred within at least a 2-kilometre radius from the blast site.

The port area is a hub for petrochemical industries, though much of what occurred and the damage extent is not fully clear, RMS reported at the time.

It is believed, at this point, that a warehouse fire “set off a moderate chemical explosion, which then triggered a major catastrophic explosion about 30 seconds later. Fires then quickly spread throughout the port area,” the statement notes.

“The explosions took place in a mostly industrial economic development zone, though some apartment blocks located about 0.6 mi (1 km) away were severely damaged and streets were covered with glass from shattered windows.”

Citing China’s Earthquake Administration, RMS notes that almost 90,000 people live within a 5 km radius of the blast site.


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