Asian catastrophe losses highlight protection gap in July: Aon

Billions of dollars of catastrophe and severe weather losses in Asia in July 2017 have highlighted the size of the insurance and reinsurance protection gap in the region. Flooding and storms in Asia caused well over $10 billion of economic losses during the month, while storms in Turkey and the United States drove the insurance industry loss for the month.

Reinsurance broker Aon Benfield’s catastrophe modelling unit Impact Forecasting reveals a story of “relentless seasonal flooding” across the month of July, resulting in many fatalities and widespread damage across parts of Asia.

China felt the effects of the funding most acutely, with around 200 people reported dead or missing while hundreds of thousands of properties were damaged or destroyed.

China’s Ministry of Civil Affairs reported the combined economic flood damage at more than US $10 billion during a six-week stretch through late June and July 2017, with much of the impact in the Yangtze River Basin.

As ever insurance and reinsurance penetration in China remains low and the industries expectation is that the insured loss will be very low, likely well below US $1 billion.

Japan also experienced heavy flooding after Tropical Storm Nanmadol made landfall, with over 2,600 homes and other buildings damaged or destroyed due to extensive flooding and landslides in the regions of Fukuoka, Oita, Shimane, Kumamoto, and Hiroshima prefectures. Economic losses in Japan from this flooding is expected to near US $1 billion.

While insurance penetration is higher in Japan this flooding alone is not anticipated to have much, if any, impact on the reinsurance arrangements of Japanese domestic insurers. This weeks Typhoon Noru could exacerbate the flooding losses though, however it’s too early to know the extent of the economic impact of that event.

Additionally in Asia, hundreds of millions of dollars of economic damages were reported due to monsoon rains in India, Bangladesh and Pakistan, where hundreds were said killed and major damage caused to structures, agriculture and infrastructure.

Finally, season rainfall in Thailand also killed at least 23 people and caused economic damage in excess of US $300 million, while a European flooding event in northern Switzerland resulted in insurance claims payouts of nearly US $90 million.

As we’ve written previously, Turkish insurers are expecting combined insurance claims payouts of US $440 million due to the two severe storm outbreaks, with the resulting hail and flooding.

Meanwhile adding to the insurance and perhaps reinsurance toll from the month of July, severe thunderstorms and related flooding struck areas of the U.S. Midwest, Plains, Southeast, Mid-Atlantic and the Desert Southwest. Tornadoes, hail, torrential rain, floods and strong winds all caused a combined economic and insured losses that Impact Forecasting expects will reach into the hundreds of millions of dollars.

As ever, the events in Asia demonstrate the fact that insurance penetration remains woefully low in many areas.

Claire Darbinyan, Impact Forecasting Associate Director and Meteorologist, commented on July’s global catastrophe activity; “There was no shortage of global natural disasters during July, though the vast majority were reported in Asia where enhanced seasonal monsoon rainfall over China and throughout South Asia led to significant flooding that caused considerable loss of life, and billions of dollars of damage to property and agriculture.

“In addition, three tropical cyclones in the region enhanced the monsoonal flow to trigger further flooding in multiple countries. Given low levels of insurance penetration in the region, the majority of these losses are expected to be uninsured, highlighting the considerable protection gap and the potential for re/insurers to further offer their specialist risk management skills.”

Other natural hazard events to have occurred elsewhere during July include:

• Major severe weather events were noted in Canada, China, and Europe.
• Officials in Italy reported that prolonged drought conditions has cost the economy some EUR2.0 billion (USD2.3 billion) in economic losses. Production of vegetables, fruits, cereals, vines, and olives were all impacted by the abnormally dry conditions which prevailed across the country during the first half of 2017.
• Extreme heat and drought conditions led to wildfire damage across parts of the United States, Canada, Portugal, France, and the Balkans.
• Tropical Storm Talas made landfall in Vietnam, causing USD44 million in economic damage.
• Strong earthquakes were recorded in the Philippines, Greece, Turkey, and China.
• A winter storm brought high winds and flooding to New Zealand; damage estimated in the millions (USD).

The full July catastrophe report can be downloaded here.