Typhoon Lekima’s insurance and reinsurance industry impact in China is expected to exceed US $855 million (CNY 6 billion), according to catastrophe risk modeller AIR Worldwide.
Lekima was the strongest typhoon to strike this region of China since 2015 and as we explained yesterday looks set to deliver perhaps the second highest economic loss to the country from a typhoon on record.
Typhoon Lekima’s economic cost is now estimated by provincial and state emergency management departments at as much as CNY 51.5 billion (around US $7.4 billion), which would be the second most costly typhoon ever in China.
Update: Economic loss figures from official sources increased to CNY 53.72 billion, US $7.63 billion on August 15th.
At over $855 million, the insurance and reinsurance industry impact is still only close to 12% of the total, reflecting the still relatively low penetration of insurance protection in China.
Typhoon Lekima came ashore in Zhejiang province China as a Category 2 equivalent typhoon, having weakened after passing the Japanese Ryukyu islands.
217.5 mm of rainfall was recorded by one weather station between Saturday morning and Sunday afternoon, which AIR notes is the highest since record-keeping for precipitation began in 1952. As of August 12th, 73 rivers had reached or exceeded flood stage and further rainfall was forecast.
Typhoon Lekima triggered landslides and flooded roads, homes, businesses, and cropland, while damage to roads and interruptions to power and telecommunications have also been reported along the storm’s path.
Major oil refineries were closed down as of August 13th in Shandong province due to flood damage and lack of road access, AIR said, which could bring some interruption claims.
Travel, tourism, and shipping have all been badly affected by Lekima, AIR continued, with cancellations and disruptions seen widely.
AIR’s estimate that the insurance and reinsurance market loss would exceed US $855 million is based on assessment of insured physical damage to onshore property (residential, industrial, commercial, and Construction All Risks/Erection All Risks), for structures and their contents due to wind and/or precipitation-induced flooding across the Chinese provinces of Anhui, Hebei, Jiangsu, Shandong, Shanghai, Tianjin, and Zhejiang.
As we explained before, the industry loss from typhoon Lekima has the potential to impact any quota shares that major Chinese insurers have in place with the global reinsurance market, but this would be expected to be a very small number of the overall exposure.
Major global reinsurers may have some broader exposure, as well as some large commercial insurers. Any impact to the ILS market is expected to be minor.