HONG KONG, July 30, 2021--(BUSINESS WIRE)--Although the recent severe rainfall that hit the province of Henan, China, could become the country’s largest insured loss event ever, AM Best is of the view that China’s non-life insurers will be able to manage and absorb the losses, according to a new AM Best commentary.
In its Best’s Commentary, "Henan Flood Losses Expected to Be Manageable for China Insurers," AM Best notes that the heavy insured toll can be attributed to China’s urbanization, as well as the fact that the extreme weather event hit a major city. AM Best expects motor insurance to account for the vast majority of incurred claims, given the heavy flooding in Zhengzhou city. The losses are compounded by coverage expansion from the country’s comprehensive motor reform in September 2020, which extended flood damage coverage to include water damage to motor vehicle engines under new voluntary motor policies.
The agriculture insurance segment also is expected to bear a significant portion of claims. China’s agricultural insurance segment has become the world’s largest agricultural insurance market, and has been growing at an annual rate of 20% over the past decade with a premium volume today that has surpassed that of the United States.
Early reported loss assessments estimate insured losses at RMB 9.2 billion (USD 1.4 billion), which would surpass the record catastrophe insured loss of approximately USD 1.0 billion incurred from Typhoon Fitow in 2013. AM Best expects the ultimate incurred losses to be manageable due to non-life insurers’ portfolio diversification—winter crops, which account for over half of the province’s crop production, already were harvested during summer, reducing insurers’ exposure—as well as additional reinsurance protection with the establishment of the state-owned China Agricultural Reinsurance Co., Ltd (Agro Re) in 2020. The province’s large size also provides wide geographical distribution. The heavy rain mainly impacted northern parts of the province, while the impact in southern areas, where most summer crops are planted, was less severe. Overall, AM Best does not expect this flood to be a capital event for Chinese insurers as the losses are expected to be within insurers’ risk tolerance levels.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=311233.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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