China's insurers would incur little loss from the country's worst earthquake since 1950 due to their low penetration in the disaster-hit zone, revealing huge market potentials and the urgency for a catastrophe insurance mechanism, said analysts.
Only a small part of quake losses would be covered by Chinese insurers, as the under-developed economy and low income levels of the quake regions had affected people's enthusiasm for buying policies, the financial and industrial research institute of Northeast Securities said in a report on Tuesday.
The 8.0-magnitude earthquake that struck southwest China's Sichuan Province last Monday had seen the death toll rise to more than 40,000 by Tuesday.
Altogether 14.6 million yuan of indemnities had been paid by the country's insurance companies as of Sunday, including those for 4,434 deaths and 2,841 injury cases.
"China has long relied on state finance and public donations in disaster relief and recovery, with only about five percent of direct economic losses covered by commercial insurance, much lower than the global average of 36 percent," Pang Jiying, vice chairman of China Reinsurance (Group) Corporation, has said.
Huge room
The quake would have temporary and minor effects on the profits of Chinese insurers but could boost their long-term growth as more people were likely to buy insurance after the quake, said a Guotai Jun'an Securities report.
Chinese insurers have huge room to extend their business, especially to rural regions, as analysts noticed the quake-hit regions were little secured.
The insurance penetration, which measures premiums as a percentage of gross domestic product, was 2.74 percent for Sichuan in 2006, below the 2.8-percent national level, said Northeast Securities.