The 4 August Beirut port explosion has led to significant uncertainty in the Lebanese insurance sector.
Mr Charbel Salameh, assistant general manager (business development) at La Phenicienne Insurance Company, said that local insurers could be liable to pay compensation for damages arising from the blast in accordance with contract obligations, according to a report by IMLebanon.
He said, "The problem is that the insured losses exceed the capital of some insurance companies, and thus they will not be able to pay compensation if the reinsurance companies refuse to pay."
Mr Salameh said that even if reinsurance companies were to pay the compensation, the reality might not be much better. He pointed out that Lebanese insurance companies have not been able to transfer the premiums owed to overseas reinsurers since the end of last year due to restrictions imposed by the government on the movement of foreign currencies. He said, “In the event that the reinsurer decides to pay compensation to those affected by the explosion, he may choose to settle outstanding accounts with insurance companies instead, thus deducting the due premiums from the compensation sum.”
Meanwhile, insured victims are busy documenting losses and preparing files for compensation claims. Compensation is pending in about 90% of insured damage cases, subject to the decision of reinsurers.
In addition, Mr Salameh wondered whether international reinsurers would renew reinsurance policies with domestic insurers. Most are due at the end of the year. “And what will the premiums be if the reinsurance companies agree to renew contracts?”
Meanwhile, insurance companies are waiting for an official report on the cause of the explosion. Compensation is seen as unlikely if blast was caused by an act of deliberate sabotage unless the insurance cover purchased includes terrorist acts.