The devastating explosion at the Beirut’s port on Tuesday, Aug. 4 caused many casualties and considerable damage, but local insurance penetration rates in Lebanon generally are low, said AM Best in a market commentary.
For the international market, however, marine and property lines of business are expected to be impacted, said AM Best, noting that some observers are drawing comparisons with the 2015 explosion in the Chinese port of Tianjin. The Tianjin explosion highlighted accumulation exposures in ports for international insurers and reinsurers, and caused extensive losses for major global carriers, the ratings agency continued.
As the situation unfolds and the investigation continues into the causes of the blast, AM Best said, the likely effect on the insurance industry remains uncertain at this stage.
AM Best said property insurance represents a small fraction of the Lebanese insurance industry, which is dominated by three segments: life, medical and motor. Based on the latest available data, these segments together accounted for almost 85% of Lebanon’s gross written premium (GWP) in 2018, said the commentary.
“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,” said the report.
“Given the extent of the damage in one of the busiest, wealthiest areas of the country, AM Best recognizes the incident will weigh on Lebanon’s already challenged insurance sector.”
In a Best’s Market Segment Report titled, “Lebanese Insurance Market Faces Mounting Uncertainty”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.
Source: AM Best
Photograph: Rescue workers and security officers work at the scene of an explosion that hit the seaport of Beirut, Lebanon, on Wednesday, Aug. 5, 2020. Prime Minister Hassan Diab, in a short televised speech, has appealed to all countries and friends of Lebanon to extend help to the small nation, saying: “We are witnessing a real catastrophe.” Photo credit: AP Photo/Hussein Malla.
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