Aon Benfield have published their Monthly Cat Recap Report for September which is put together by their Impact Forecasting catastrophe modelling and analysis arm. The report takes a look at the major natural catastrophe and weather events around the globe during the last month and puts economic loss figures on the resulting damage.
The September edition of this monthly report takes a look at the Asian monsoon season and says that economic losses from monsoon events and related disasters are getting close to $7 billion this year.
The report shows that seasonal monsoon rains triggered significant flooding and landslide events across Asia, with impacts particularly bad in China, Thailand, India, Pakistan and Cambodia. In China alone economic losses were reported as being $4.25 billion, in Thailand they are estimated at $1.1 billion and in India economic losses were estimated at more than $1 billion. Pakistan’s losses were estimated at $356m+ and Cambodia they are unknown due to the developing nature of the country.
Insurance and reinsurance penetration is still low in all of these countries and many of the areas affected are developing fast. This means that the economic loss figures are destined to rise from monsoonal rains as the countries affected modernise their infrastructure and housing and insured losses will grow as penetration of coverage rises. That in turn will pass on more of these losses to the reinsurance industry.
In years to come the Asian monsoon could become one of the largest, and most regular, insurance losses of the year.With a lot of discussion in the microinsurance market about expansion of weather-index insurance programs, penetration of these low-cost insurance coverages could grow rapidly. That will create opportunity for reinsurers to underwrite those programs, but will also expose the global reinsurers to a new source of loss which has the potential to be extremely large. The monsoons in Asia are a risk that will become more relevant to global re/insurers within the next ten years given the speed of economic development in this region.
Challenges remain in quantifying the risks of monsoon and pricing insurance coverages. Steve Jakubowski, President of Impact Forecasting, said; “The monsoon season has affected many parts of Asia with extremely heavy rainfall over the past several months, which is not unexpected for the region during this time of year. However, in many areas, re/insurance penetration remains relatively low. Flood modeling, in general, is still a science in progress, and in these Asian regions particularly, the scientific and modeling communities are striving to understand the peril and its effects, in order that governments can best mitigate the seasonal rainfall, and that the re/insurance industry can structure and price appropriate products to assist in the management of this risk.”
It will be interesting to see what role the capital markets can play in covering these risks using innovative structures linked to weather conditions and risk metrics.
The report from Aon Benfield also discusses other natural and weather disasters which occurred during September, including tropical storm Lee which caused over $1 billion in economic losses, the damage that the remnants of tropical storm Katia caused in the northern UK and the Texas wildfires.