The Lutine Bell is seen following the Lloyd's of London annual Remembrance Day service at the Lloyd's Building in the City of London November 11, 2014. [Photo/Agencies]

Insurance claims are expected to cause significant impact on the Chinese economy, and the incident demonstrates the danger of China not diversifying its insurance risks, said John Nelson, chairman of Lloyd's of London's reinsurance market.

In an exclusive interview with China Daily in London, Nelson said the Tianjin disaster was a "wake-up call" for the Chinese authorities to realize the need for more liberalization in China's insurance and reinsurance market, so that foreign insurers can further enter China's market.

Unlike most mature markets the amount of risks in China that are reinsured outside of China is very small, meaning a big catastrophe like the Tianjin earthquake will affect the domestic economy severely.

According to estimates by Credit Suisse, insurances losses could total nearly 1 billion pounds following the two explosions in the Chinese city of Tianjin that killed more than 100 people.

Lloyd's for example, already has subsidiaries in Shanghai and Beijing, but the regulatory burden it faces is still big. Because the Chinese insurance regulator has not developed a separate regulation for reinsurance markets like Lloyd's, it is regulated in China like a reinsurance company, meaning some regulations are less well suited to its true function, Nelson said.

Furthermore, China's capital account controls which restrict the inflow and outflow of cross-border capital limits the amount of risk that can become reinsured outside of China. These restrictions make it more expensive for Chinese insurance firms to reinsure their risks outside of China, in comparison to reinsuring the risks with Chinese reinsurers.

Nelson says in principal the Chinese regulators are trying to open up the market both by allowing foreign competition into China and encouraging Chinese insurance firms to expand outward, but still much work is needed to be done.

And as China becomes an increasingly sophisticated and international economy, integrating its insurance sector with that of the global market is increasingly important.

Nelson expects some of the Lloyd's syndicates to be receiving claims from the Tianjin explosion but now is too early to estimate the amount.

He expects the amounts of exposure Lloyd's syndicates have will be small, and will not affect the Lloyd's market as a whole, although he cannot estimate "how small it is".

In addition, insurance companies including Zurich and Allianz, have said they have received claims from clients that had been affected by the disaster.

"We have received some claims notifications and are currently analyzing the total situation. Impacted business lines are, among others property, marine and employer liability," said Zurich in a statement.

"It's way too early to make any statements on our net impact. Reinsurance is in place to provide us with additional protection. We and the whole industry have been requested to report the claim situation and progress to the regulator," the statement said.

Allianz said in a statement that the company is currently contacting clients to assess any claims and have loss adjusters standing by to support them as fully and quickly as possible on site.

"While it is too early to assess all claims fully, based on our initial review of exposures, we expect to receive a limited number of claims from this incident. Based on the available information, we do not anticipate major financial claims to arise from this incident, but we will continue to assess the situation," said the Allianz statement.

To contact the reporter: cecily.liu@mail.chinadailyuk.com