Weather coverage segment may be seeing loss ratios as high as 100 percent.
Damage to crops that has occurred as a result of cyclones could be leading to higher loss ratios in the weather South Asian insurance industries, with predictions that they could be as high as 100 percent, this year.
Cyclone Phailin has caused a tremendous loss ratio this year when it struck in October.
The crop damage that was caused by Cyclone Phailin when it struck the coast of Orissa and Andhra Pradesh early in October may lead that sector of the South Asian insurance industry to suffer a 100 percent loss ratios. The damage to crops include seasonal vegetables and paddies. Insurers in the region have said that this could mean that the loss ratio will skyrocket.
The insurance industry did not see many losses from lives, fortunately, but there were also many structures damaged.
It was very lucky that among the losses experienced by the sector, lives were not high on the list. It was paddy crops, public property, and kucha houses, which are homes and huts that are made out of hay and mud. The cyclone’s aftermath was also devastating to the area, as it led to massive flooding in areas such as Orissa and Bihar. This caused further decimation of crops, beyond that caused by the storm itself.
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According to K. G. Krishnamoorthy Rao, MD and CEO of Future Generali India Insurance, monsoons from earlier in the year had cause the Weather Based Crop Insurance Scheme (WBCIS) to perform very strongly. However, this recent cyclone in the region will bring about losses because of the considerable exposure that they face within the areas that were affected by the storm.
In terms of the crops, it truly was the after effects of the storm and not the immediate cyclone that caused the most damage. As those figures are tallied up, it is expected that insurers will only be watching the losses rise quite sharply and steadily. In a typical year, WBCIS experiences losses in the range of 60 to 65 percent. However, officials in the insurance industry have explained that these will likely rise not only in the specific areas that the cyclone struck in October, but also because of Cyclone Helen, which has also caused massive paddy crops damage in Andhra Pradesh districts. In fact, a private insurer in that area has estimated that those losses could rise to 200 percent.