Published on: 7/11/2020
Owners of damaged homes and businesses are still waiting for insurance companies to pay compensation three months after August 4 explosion
Pressures have increased on insurance companies in Lebanon with the start of the rainy season and the heavy damage it caused to homes already ruined by the Beirut port explosion in August.
The owners of damaged homes and stores are still waiting for insurance companies to pay compensation and insurance companies, in turn, are awaiting the release of the official report on the cause of the explosion before they can pay out.
The explosion that ripped through Beirut three months ago, caused by 2,750 tons of ammonium nitrate stored improperly for years at the port, was large enough to damage buildings several kilometres away and resulted in the deaths of at least 220 people, in addition to causing over 7,000 injuries, while an estimated 300,000 are homeless.
Damage to the property could reach $15 billion. Insurance companies in Lebanon are likely to share a chunk of this damage, with consequences for banks and foreign reinsurers.
The Association of Insurance Companies in Lebanon (ACAL) said the full impact of the explosion on the insurance sector and on reinsurers will depend on the results of the investigation about the cause of the blast, which will determine if it is an act of war, a terrorist attack or an accident.
It noted that in case of an accident, then most of the fire, property, marine and all risk policies will cover the insured losses.
ACAL estimated that the insured losses from the explosion could reach up to $1.5 billion, mostly from the complete or partial damage to about 10,000 properties and 5,000 cars. It also noted that the insured losses could be equivalent to about 25 percent of the total damages from the blast, and that up to 10 percent of the damaged properties are insured amid the lack of obligatory insurance on properties in the country.
It pointed out that about 90 percent of the insured losses are reinsured with 'A'-rated reinsurers, and that Lebanese insurers are negotiating with reinsurers about the settlement of claims, even in the absence of a final official report about the cause of the explosion. Some insurers have started to settle small claims, such as on car damage, while larger claims need more time to be settled.
However, fears have arisen in recent days that the insured would collide with the default of some insurance companies, which did not pay the reinsurers what they owed.
Sources in the Insurance Companies Control Committee revealed to Arabian Business that a large number of insurance companies did not properly re-insure with the outside world, which puts about $700 million of the value of damage caused to institutions, homes and cars in the area of the explosion at risk.
Fateh Bekdache, chairman and CEO of Arope Insurance in Lebanon, told Arabian Business; "The investigation into the causes of the explosion was delayed, and it didn’t seem that anything new would appear in the short term. Pressure on insurance companies was increasing."
He said that claims arising from a similar explosion in Toulouse, France in 2001 were settled by Total a year later but the government helped the affected people stay in their homes by making repairs while the results of the investigation were awaited.
He revealed that there had been progress in the negotiations between Lebanese insurance companies and foreign reinsurance companies, but a delay has occurred due to disagreements.
"While trying to get reinsurers to understand our point of view and start paying compensation, we are content to pay small amounts for car damages and minor damages to homes and stores covered by insurance coverage," Bekdache said.
With the exception of removing rubble from the streets and limited restoration operations in some homes and institutions, those affected by the explosion of Beirut Port are still waiting for relief. Whoever has money to make repairs cannot dispose of them, because they are held in banks while those waiting for insurance companies have the winter to contend with.
Camille Mdawar, 45, owner of a damaged apartment in Gemmayzeh, Achrafieh, told Arabian Business: "The rain came into the apartment, thus aggravating the damage caused to us, and we have not yet received any money, neither aid nor insurance compensation. We lose hope of getting any compensation and we can't repair our apartment on our own."
Khalil Chahwan, 50, owner of another damaged apartment in Mar Mikhael, Achrafieh, said: "How can insurance companies forget all the money they've collected over the past 10 and 20 years from companies, institutions and homes, and evade today even paying the costs of repairing shattered glass?"
Source: Arabian Business
Tags: ACAL, Insurance Companies