Observers are drawing comparisons with the 2015 explosion in the Chinese port of Tianjin, which highlighted accumulation exposures in ports - AM Best
The cause of the massive port explosion in Beirut, which resulted in many casualties and considerable damage is still under investigation. As the situation is unfolding, the likely effect on the local insurance market remains uncertain at this stage, according to rating agency AM Best.
Insurance penetration rates in Lebanon generally are low and property insurance represents only a small fraction of the Lebanese insurance industry, which is dominated by three segments: life, medical and motor. Based on the latest available data, together these segments accounted for almost 85% of Lebanon’s gross written premium (GWP) in 2018.
However, property insurance has been a growing line – accounting for 6% of total GWP in 2018 – as insurers have leveraged their relationships with policyholders to offset weaker performing motor business by cross-selling more profitable products. Given the extent of the damage in one of the busiest, wealthiest areas of the country, AM Best recognises the incident will weigh on Lebanon’s already challenged insurance sector.
In a report published in March 2020, AM Best noted that civil unrest and a ballooning public debt had increased the level of economic uncertainty, negatively impacting the credit quality of Lebanon’s insurance market.
For the international market, marine and property lines of business are expected to be impacted. Some observers are drawing comparisons with the 2015 explosion in the Chinese port of Tianjin, which highlighted accumulation exposures in ports for international insurers and reinsurers, and caused extensive losses for major global carriers.