Quake rocks China`s insurance sector, damages touch $20 bn

Just 5 per cent of the more than $20 billion of damages from the quake in Sichuan province is covered by insurance, according to estimates from an official at the China Insurance Regulatory Commission, who declined to be identified.

By contrast, about half of the $120 billion of estimated costs from Hurricane Katrina, the most expensive storm in US history, was insured by companies or the federal government, data compiled by analysts at Jersey City, New Jersey-based Property Claim Services show.

"The earthquake underscores how much room insurers have to penetrate into rural China," said Zhang Ling, who oversees $1.1 billion for ICBC Credit Suisse Asset Management Co. from Beijing and holds Ping An Insurance (Group) Co. shares. "There'll be much more momentum and government support to do that after this year's natural disasters."

China Life Insurance Co. and Ping An, the nation's biggest insurers, have yet to extend their reach across China, where only 4 per cent of the nation's 1.3 billion people have insurance, according to data compiled by KPMG International. By contrast, 77 per cent of Americans own some type of life insurance policy.

The 7.9 magnitude quake has killed about 20,000 people since May 12, damaged and destroyed homes and buildings in 44 counties and districts in Sichuan, and directly affected about half of the 20 million people who live in the region. At least 30,000 people remain buried under rubble.

"If a disaster like this happened in Europe or the US, the claims situation would be very different," said Michael Spranger, a Hong Kong-based earthquake analyst at Munich Re, the world's No. 2 reinsurer after Swiss Re. "Natural disaster coverage rates are very low across Asia, in the single digits."

The Niigata earthquake, which struck central Japan last July, recorded total damages of $3 billion, with insured losses equivalent to 10 per cent of the total, according to Clarence Wong, chief economist for Swiss Re Asia in Hong Kong.