Typhoon Nepartak adds to rising nat cat losses

The impact from the typhoon and the nat cat statistics have further strengthened the call for greater insurance coverage in Asia, where the protection gap continues to cause concern. Typhoon Nepartak hit the island of Taiwan on 7 July, before moving onto mainland China two days later. In Taiwan, one week after the typhoon had hit, the damage included the loss of three lives and injuries to more than 300 civilians. In excess of 17,000 people were displaced and up to 517,000 were left without power. In addition to the property damage, the storm also had a massive impact on transport and industry. More than 640 flights were cancelled, while the rail network was suspended along with most workplaces across the country. Fortunately, no damage to semiconductor plants in southern Taiwan was reported.hideMeanwhile, in mainland China, the typhoon led to the evacuation of more than 420,000 residents and more than $1bn in losses in the Fujian province, although the damage could have been worse had it not been for Taiwan bearing the brunt of the storm. “China experiences more tropical cyclone landfalls than any of its neighbours in the northwest Pacific, and Fujian is one of the Chinese provinces most often affected by typhoons,” said Dr Peter Sousounis, assistant vice-president and director of meteorology at catastrophe modelling firm AIR Worldwide. He continued: “However, exposures in the province are somewhat protected by Taiwan, which lies directly to the east across the Taiwan Strait. Although storms that cross the mountainous terrain of Taiwan may regain typhoon status before making landfall on China’s mainland coast, they are typically weakened. “Even these weakened storms, however, can bring heavy rainfall and significant flooding, which can contribute more to insured losses than typhoon winds. The region experiences ten times as many weak typhoons as strong ones.” It is still too early for comprehensive damage reports to emerge from the region, said AIR Worldwide. Numerous landslides have already been reported in rural and mountainous areas, one of which trapped 18 iron workers in a factory in Fujian’s Gutian County. Roads have been damaged or inundated, and part of a highway flyover collapsed in Minqing County. Many buildings are reported to have collapsed. Furthermore, the extent of flood losses and crop damage that can be directly attributed to Typhoon Nepartak is highly uncertain because of the pre-existing conditions, according to AIR Worldwide. Because of an extended period of unusually heavy rain, southern China was already experiencing unprecedented amounts of flooding and crop damage before Nepartak. Along the Yangtze River and its tributaries, 164 people have been killed by hail and rain-induced flooding since 30 June, as well as 1.84 million people evacuated, 56,000 houses and 560,500 hectares of crops destroyed, according to local authorities’ estimates. At the time of going to press, China is bracing itself for Typhoon Nida, which is forecast to make landfall on 2 August. The southern city of Guangzhou closed offices and schools in anticipation of “a serious impact” from the storm, said the city authorities. Meanwhile, China’s state-controlled offshore oil and gas producer CNOOC suspended some of its production operations and evacuated more than 2,200 offshore workers. Nida is the fourth typhoon to hit China this year, where 800 people have been killed by natural disasters since June, the highest number of casualties in the same period since 2011. The amount of losses resulting from natural catastrophes worldwide has risen sharply in the first half of 2016 compared to the previous year, with Asia-Pacific proving particularly susceptible to nature’s wrath. According to figures from reinsurer Munich Re, nat cat losses were ”significantly higher” for the first half of 2016 compared to the previous year – $70bn compared to $59bn; while insured losses were on a similar level – $27bn compared to $19bn. The problem for the insurance industry is that the region responsible for the majority of natural catastrophes and disasters is also one of the lowest in terms of insurance coverage, even in relatively mature markets such as Japan. The largest loss in 2016 came from two earthquakes in the space of two days in April on the Japanese island of Kyushu. The quakes killed 69 people and destroyed countless buildings, resulting in the relocation of tens of thousands and the suspension of operations for numerous businesses. The overall loss came to $25bn, of which just $5.9bn was insured, said Munich Re. The Munich Re figures will strengthen the insurance industry’s call for greater adoption of nat cat insurance in Asia-Pacific. The Center for Global Development (CGD), a US-based non-profit thinktank, has called for catastrophe insurance schemes to be expanded to reach more emerging markets and developing economies. In a recently published report – Payouts for Perils: Why Disaster Aid is Broken and How Catastrophe Insurance Can Help to Fix It – CGD members Theodore Talbot and Owen Barder have argued that catastrophe insurance and features such as parametric triggers can play a key role in improving the financing of disaster aid and providing coverage for a range of perils. At the same time, the London Market Group, an insurance industry taskforce working with the UK Treasury, has published a whitepaper to develop a foreign aid catastrophe bond (FAB) as an alternative to foreign aid. The FAB would be fully collateralised by third-party investors and would be issued to cover certain peril regions, while member countries will pay a risk premium in return for a post-event payout.

Typhoon Nepartak adds to rising nat cat losses

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