China's Insurers May Pay $290 Million Quake Claims

China's insurers may pay 2 billion yuan ($290 million) in claims from the nation's most powerful earthquake since 1950, analysts say. That's less than 1 percent of their premium income in the first five months of 2008, reported The Bloomberg.

``Earthquake claims should be absorbable,'' said Standard & Poor's analyst Connie Wong in Hong Kong. The bigger concern is this year's 46 percent slump in the benchmark CSI 300 stock index, she said.

Profits at China Life Insurance Co. and Ping An Insurance (Group) Co., the nation's biggest insurance companies, may decline because of the drop in equity prices, and as claims from the earthquake and the worst snowstorms in 50 years during January continue to mount. Wu Dingfu, chairman of China's insurance regulator, said last month that insurers must ``become more vigilant than ever about controlling risk.''

BNP Paribas SA doubled its estimate for insured claims from the earthquake to 2 billion yuan after the industry's regulator prodded companies to make ``goodwill'' payments that may not technically be covered under policies, said Dorris Chen, an analyst at the Paris-based bank in Shanghai. The estimate is equal to 0.4 percent of Chinese insurers' January-to-May premiums.

``There're a lot of ambiguities about what is covered and what isn't,'' Olive Xia, a Core Pacific Yamaichi analyst in Shanghai, said.

The $290 million in estimated claim payments is only 1.5 percent of the more than $20 billion of damages from the quake estimated by a China Insurance Regulatory Commission official.

The May 12 earthquake, the most powerful to hit China since a magnitude 8.6 quake struck Tibet in 1950, killed 69,181 people as of June 22 and injured 374,171, China's official Xinhua news agency reported. The country's seismology department said the Sichuan quake had a magnitude of 8, while the USGS put the magnitude at 7.9.

China Life, the nation's biggest insurer, has said it may pay 230 million yuan in claims from the May 12 earthquake. The cost would equal 0.2 percent of the company's 151.5 billion yuan of premiums in January through May. The Beijing-based insurer may eventually pay up to 700 million yuan, Xia said.

Life insurers will face larger claims since their policies include earthquake coverage, while most property policies do not, said S&P's Wong. China Life may face most of the life insurance claims, Wong said.

China Life had about 43 percent of the nation's life insurance market in the first five months of this year, according to data from the China Insurance Regulatory Commission. The company commanded 60 percent to 70 percent market share in most of China's rural regions in 2006.

``Even if China Life makes more quake payouts than other insurers, the quake itself shouldn't impact their profit and losses because the total amount will be a drop in the bucket for their size,'' said Xia, who has a ``hold'' rating on the stock.

China Life and Ping An have yet to expand across China, where only 4 percent of the country's 1.3 billion people have insurance, according to KPMG International. By contrast, 77 percent of Americans own some type of life insurance policy.