Low insured losses expected from devastating Typhoon Haiyan

AM Best does not expect gross losses from the disaster to exhaust the reinsurance capacity in place. It will be an earnings event for the sector, the rating agency added. Insured losses from Haiyan are expected to be 'minimal' due to low non-life insurance penetration rates in the Philippines of less than 1% of GDP, said AM Best. AM Best and other experts have said it is too early to calculate any reliable loss figures for the event.hideDespite the fact Haiyan could turn out to be the strongest tropical cyclone ever recorded, AM Best said the small insured loss will not have any major rating impact on reinsurers. Rather, it will be a minor earnings event for the large, global reinsurers, it said, adding that for smaller, regional players it will be have more of a substantial impact. Commenting immediately after the typhoon made landfall in the Philippines on 8 November, PwC said that sadly the social and economic impact of catastrophes on the Philippines is very large but that insured recoveries are very small. The economic cost of the typhoon is expected to be the highest from a natural disaster in the Philippines' history, but the country has one of the lowest insurance penetration rates in the world as measured by premiums as a percentage of GDP, said Mohammad Khan, Insurance Partner at PwC. "Therefore we would not expect the level of insurance losses to be anywhere near as significant as the economic loss. For example, Typhoon Bopha that hit the Philippines last year...had reported economic losses of US$1 billion (£600 million) and global insured losses of less than £50m," he said. Dom del Re, Catastrophe Expert at PwC, added that reinsurance classes most likely to be impacted are commercial and industrial property, along with some marine business. "For growing global reinsurers, this massive category 5 typhoon is a reminder of the risk the country is exposed to. The future revenue potential is attractive and premium has grown as much as 12% in past years, but catastrophe risk management will be a key component of any growth strategy. Even allowing for the events in the Philippines this has been a benign year for the global catastrophe reinsurance markets and if this activity continues to the end of the year, this will have a downward pressure on rates," he added. Preliminary analysis suggests that Haiyan, named Yolanda in the Philippines, may have been the strongest storm to make landfall anywhere in the world in recorded history. The Joint Typhoon Warning Center (JTWC) estimated sustained wind speeds of 315km/h when it first made landfall. The storm maintained high wind speeds as it traversed the Philippines. The national meteorological agency, PAGASA, reported that Haiyan made a total of six landfalls through the Visayas region before exiting into the South China Sea. The catastrophic destruction wrought by the storm's winds and massive storm surge are becoming clearer, but the full extent of the damage will not be known for some time. Power, communications and water supply remain down throughout the affected region and officials have yet to reach remote areas cut off by blocked roads, landslides and floods. If the wind speeds are confirmed, Haiyan will replace Hurricane Camille as the strongest recorded storm. It made landfall on the Gulf Coast of the US in 1969 with winds of 305km/h. The strongest storm to make landfall in the northwest Pacific before Haiyan was Super Typhoon Megi, which struck the Luzon region of the Philippines in 2010 with winds of 290km/h. According to AIR, precipitation totals of 350mm were observed by NASA's TRMM satellite, although higher amounts may ultimately be recorded by rain gauges as communication and power come back online. Official government reports indicate that more than 2 million families and nearly 10 million people in the Philippines have been affected by the storm. The islands of Leyte, Samar and northern Cebu are the worst affected. Relief efforts from both national and international agencies are underway, but damage to infrastructure, including to roads and airport, are hindering operations. After leaving the Philippines, Haiyan entered the cooler waters of the South China Sea where it gradually weakened.

Low insured losses expected from devastating Typhoon Haiyan

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