Best’s News & Research Service - September 13, 2023 10:06 AM (EDT)
Best’s Commentary: Hong Kong 1-in-500-Year Flood Likely to Have Earnings Impact on Insurers
- September 13, 2023 10:06 AM (EDT)
Hong Kong //BestWire// - 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 hard market the last few years, according to a new AM Best commentary.
Referenced as 1-in-500-year event, the storm dropped a quarter of Hong Kong’s annual rainfall total in 24 hours. In the Best’s Commentary, “Hong Kong 1-in-500 Year Flood Likely to Have an Earnings Impact,” states that AM Best expects that the gross losses on property and auto lines will not be quite as severe but could come close to rivaling the HKD 3.1 billion (USD 400 million) in losses wrought by Typhoon Mangkhut in 2018, but that 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.
Offsetting factors include lower inflation in East Asia as compared with many other parts of the world, and supply chain normalization, which continues as the region recovers from the pandemic. Good risk management of the city’s drainage systems and contingency planning also should help minimise insurance losses.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=335604 .
AM Best is a global credit rating agency, news publisher and data analytics provider specialising 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.