Bangkok--20 May--Moody's Asia Pacific Moody's Investors Service says that the immediate impact of the massive earthquake which struck China's Sichuan Province last week on the country's insurers and banks will be manageable. The quake has claimed, according to the latest reports, more than 30,000 lives. The Chinese government has mounted a huge rescue operation, while the international community has pledged assistance to cope with the tragedy. From the insurance perspective, losses for China's property & casualty (P&C) and life insurers -- as a result of the earthquake -- should be manageable. "Early estimates of total property losses from the Sichuan earthquake range from RMB70 billion (US$10 billion) to RMB140 billion (US$20 billion)," says Sally Yim, a Moody's Assistant Vice President/Analyst in a new report. "However, insured losses are estimated to amount to only a fraction of this cost as insurance penetration in China remains low, and most Chinese P&C policies do not cover earthquakes," says Yim. "This is particularly the case in the areas worst affected by this terrible event." Most of China's top 10 life and P&C insurers derive less than 5% of their premiums from Sichuan, and while those with more than 5% may experience more negative pressure on profitability in 2008, their overall losses should be manageable. Moody's believes that insurer profitability will almost certainly deteriorate from the record highs set in 2007, in light of high cumulative catastrophe losses -- China suffered severe snowstorms in January -- and likely weaker investment income. However, since the industry began 2008 with stronger balance sheets than those at the start of 2007, overall insurer capitalization will not likely be affected. At the same time, from a banking perspective, Moody's believes that any resulting credit losses at Chinese banks will be minimal. "Commercial bank credit exposure to Sichuan is fairly low. We estimate it was around RMB 600 billion ($85 billion) or 3% of total commercial bank loans as of end-2007," says Richard Lung, a Moody's Vice President/Senior Analyst. "None of Moody's rated commercial banks have significant loan concentrations in the areas affected by the tragedy, and should only incur minor credit losses from this event," adds Lung. Meanwhile, the People's Bank of China, China Insurance Regulatory Commission, China Banking Regulatory Commission and other financial regulators have taken steps to ensure the smooth and efficient functioning of the financial system, which should help to aid recovery efforts. China has now begun three days of mourning for the victims of the earthquake and strenuous efforts to rescue survivors continue. The report, entitled "Sichuan Earthquake: A Deadly Catastrophe but Losses for Chinese P&C and Life Insurers are Manageable", can be found at www.moodys.com. Hong Kong Sally Yim Asst Vice President - Analyst Financial Institutions Group Moody's Asia Pacific Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (852) 3551-3077 Hong Kong Richard Lung Vice President - Senior Analyst Financial Institutions Group Moody's Asia Pacific Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (852) 3551-3077