HONG KONG 1-IN-500-YEAR FLOOD TO DAMPEN REINSURANCE RENEWALS - AM BEST

KUALA LUMPUR, Sept 18 (Bernama) -- The recent devastating 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 tough market in recent years, according to a new AM Best commentary.

In a statement, the global credit rating agency said referenced as one-in-500-year event, the storm dropped a quarter of Hong Kong’s annual rainfall total in 24 hours.

In the AM Best commentary titled "Hong Kong 1-in-500 Year Flood Likely to Have an Earnings Impact", it is expected that the gross losses on property and auto lines will not be quite as severe but could come close to rivalling the HKD3.1 billion (US$400 million) in losses wrought by Typhoon Mangkhut in 2018. (US$1=RM4.68)

Nevertheless, 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, the impact on reinsurance pricing, which is already elevated, could make it too costly for some smaller companies.

There are some 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.

Additionally, good risk management of the city’s drainage systems and contingency planning also should help minimise insurance losses.

-- BERNAMA