The August disaster in Tianjin, China, where explosions killed 150 people, injured thousands and caused billions of dollars in damage, provides an object lesson on the issue of insurance. Not only do businesses need to have both appropriate and adequate coverage, they need to be able to afford it.
In protecting their business-owning clients’ assets, advisors must consider those insurance needs, and if they have clients invested in insurers, they should keep an eye on industry changes that arise out of the disaster.
Whether it’s to cover goods destroyed at an outside facility, business interruptions due to a gap in the supply chain or possible liabilities connected with failure to research partners or vendors, your clients need to be sure that immediate losses are covered as well as possible downstream problems.
Damages from the explosion cover as broad a base as many natural disasters, but what makes the Tianjin event so significant, for both insurers and business owners, is the potential for liability issues. Amid charges of corruption, questions have arisen about how Rui Hai International Logistics handled the hazardous materials in its care.
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There’s also the high cost of claims. Estimates from sources like Fitch Ratings and Credit Suisse immediately after the event put possible claims totals between $1 billion and $1.5 billion, but as more became known about the extent of the damage, reinsurer Guy Carpenter set the high end at more than double that amount: $3.3 billion.