Fitch: Limited Impact on Chinese Insurers from Sichuan Quake

Fitch Ratings does not expect the April 20 earthquake in China to have a significant impact on Chinese insurers' financial performance or solvency position.

While claims statistics and losses are still developing, initial claim figures from several insurance companies and the insurance  regulator suggest the losses on an incurred basis from the catastrophe are manageable and will not trigger market-wide solvency issues for Chinese insurers.

Fitch believes claims will escalate, but the accumulated incurred losses are unlikely to substantially exacerbate the underwriting margin of major non-life insurers such as PICC Property and Casualty Co. and Ping An Property and Casualty Co., which are in the Sichuan province.  

The insured losses from this event are unlikely to be material, since the affected area in teh Sichuan province lack large manufacturing plants or raw material production centres. 

Additionally, insurance coverage in the key quake area remains low–likely less than 1% in terms of the ratio of insured loss to economic loss. As a point of reference, economic losses for the May 2008 7.9-magnitude quake in Wenchuan county of Sichuan, which destroyed infrastructure and properties extensively, amounted to US$124 billion while the total insured losses were about $366 million.