Bermuda’s reinsurers may face huge payouts in the wake of a massive chemical explosion in a Chinese port that claimed more than 100 lives.

Ratings agency Fitch estimated that losses from the Tianjin event could hit $1.5 billion.

Leila Madeiros, senior vice president and deputy director of the Association of Bermuda Insurers and Reinsurers, said: “As with any catastrophic event such as the explosion in Tianjin last week, we are saddened with the loss of life and destruction of property experienced.”

She added that the $1.5 billion estimates remained “speculative.”

Ms Madeiros said: “In that regard, it’s even far too early to make determinations of the costs to be borne by the Chinese domestic market and the global commercial insurance and reinsurance markets including the impact to Bermuda companies.

“As the company loss assessments and disclosures continue over the coming days and weeks, the picture of the extent of both insurance and reinsurance losses will become clearer.

“Commercial insurance markets are global and large losses like this likely will be distributed through those markets. Unimpeded cross border trade helps make such markets competitive.”

A report by Fitch said: “The high insurance penetration rate in this area could make the blasts one of the most costly catastrophe claims for the Chinese insurance sector in the last few years.”

It added: “Claims from the blasts could be shared with both local and international reinsurers, which could mitigate the direct impact on the Chinese insurance sector.”

Losses of vehicles are estimated to be between 8000 and 10,000.

The report said: “Aside from motor excess of loss treaties, in which the reinsurers indemnify the ceding companies for losses that exceed a specified limit, it is common for Chinese insurers to use quota share reinsurance treaties to mitigate their solvency strain due to the strong growth in recent years from the motor insurance book of business.”

And the International Union of Marine Insurance (IUMI) warned that accumulation risks — when a single event causes and exceptionally large group of related losses — continued to grow.

IUMI president Dieter Berg said: “To evaluate worst case scenarios we need to fully understand the value of the goods in the port and all potential exposures before we can calculate adequate premiums.

“This is becoming more of a challenge as these facilities continue to expand.”

Lloyd’s agency network estimated that more than 10,000 vehicles were destroyed in a series of blasts at one of the world’s busiest ports last Thursday.

IUMI cargo committee chairman Nick Derrick said: “With average retail values of $30,000, this could result in a loss of $300 million for vehicles alone.

“Container losses are likely to be spread among many marine cargo insurers but motor vehicle insurance is a specialist sector and so that market is likely to be hit hard.”

The Fitch report added: “The majority of claims will come from motor, cargo, liability and property insurance.”

It added that — although medical and life insurance claims were also likely to be “substantial” — these would be covered by Chinese government-supported schemes and individual medical and life insurance policies.