Severe flooding, earthquakes, hurricanes and other disasters are leading to massive catastrophic losses.
Insurance companies are feeling more than just a pinch from providing coverage in China. The country has faced massive severe rainstorms, flooding and other disasters, and they are becoming increasingly commonplace.
July’s flooding in Henan broke a record for single most costly event with $1.7 billion in insured losses.
This has been particularly hard on insurance companies selling property and casualty coverage, said an S&P Global Ratings report tracking losses to August 3. The rainfall in Henan reached the highest levels seen in the region since 1951, at which time the first records were made, said state weather officials.
The rains lead to flooding and mudslides across the region that killed more than 300 people, according to Global Times, a state-backed tabloid. Over a million hectares of crops were destroyed, as were more than 35,00 houses in that province alone, reported the Xinhua state news agency. That report said that there were over $20.63 billion (113.7 billion yuan) in direct losses.
These losses are only a reflection of the increases in claim payments insurance companies have been facing.
“We expect insurance claims from the (Henan) flooding … to exceed CNY8 billion ($1.23 billion), or about 0.7% of China’s total non-life direct premiums written in 2020,” said a report from Fitch Ratings at the end of July. “Fitch believes the flooding losses will be material to the insurance industry as reported claims have continued to surge.”
Natural disasters themselves are nothing new to China. It has long suffered from regular hurricanes, flooding, and earthquakes. However, the difference is that the country has urbanized exceptionally rapidly, and while insurance is still not as widespread there as it is in many other countries with its level of development, coverage is also rapidly growing.
Insurance companies are still covering only a fragment of the total compensation for catastrophic losses in China, according to a report from the World Bank. Claims comprised under 1 percent of direct economic loses in large scale disasters, said the report tata. Compensation was mainly from public donations and government relief programs.