Hong Kong flooding to pressure upcoming reinsurance renewals
The recent flooding following Super Typhoon Saola in Hong Kong and other parts of China may further pressure upcoming reinsurance renewals, in what has already been a hard market the last few years, according to AM Best.
The typhoon has been described as a 1-in-500-year event, dropping a quarter of Hong Kong’s annual rainfall total in 24 hours.
Best said it expects that the gross losses on property and auto lines could come close to rivalling the HKD3.1bn ($400m) in losses wrought by Typhoon Mangkhut in 2018. However, the ratings agency said the overall impact of the rainstorm is likely to be more of an earnings event for insurance companies than a material hit to capital adequacy.
However, Best said that based on fourth-quarter 2022 provisional data, net premiums accounted for 40% of gross property damage premiums, which could increase if reinsurance pricing becomes too costly for some smaller companies or if some larger players decide to take on more risk.
Offsetting factors include lower inflation in east Asia as compared with many other parts of the world, and supply chain normalisation, which continues as the region recovers from the pandemic, said Best, adding that good risk management of the city’s drainage systems and contingency planning also should help minimise insurance losses.
Best noted that the property damage line posted a HKD530.6m ($68.2m) underwriting gain for year-end 2022, while comprehensive motor vehicle reported a HKD156.7m ($20.1m) gain, and third party, a HKD347.7m ($44.7m) loss.
In the first half of 2023, natural disasters in the Asia-Pacific region resulted in overall losses of approximately $7bin, of which roughly $3bn was insured, according to Munich Re’s half-yearly review of global natural disasters.
