AM Best expects Henan flood losses manageable for China insurers

KUALA LUMPUR, July 30 -- 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 China’s non-life insurers could 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 the heavy insured toll can be attributed to China’s urbanisation, as well as the fact 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, according to a statement.

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.

In addition, the agriculture insurance segment is also 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 per cent over the past decade with a premium volume today that has surpassed that of the United States.

Early reported loss assessments estimated insured losses at RMB 9.2 billion (US$1.4 billion), which would surpass the record catastrophe insured loss of approximately US$1.0 billion incurred from Typhoon Fitow in 2013. (US$1 = RM4.235)

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.

Headquartered in the United States, AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. More details at www.ambest.com.

-- BERNAMA