Insurance and potentially reinsurance industry losses caused by recent Typhoon Mangkhut’s impacts in Hong Kong, mainland China and Macau are estimated to be in a range from $1 billion to as much as $2 billion by AIR Worldwide.
Typhoon Mangkhut battered Hong Kong with some of the worst typhoon winds and storm surge the city had ever seen, after which it slammed mainland China in the Guangdong region and Macau.
Before it had even hit this region typhoon Mangkhut had caused deadly impacts in the northern Philippines, but catastrophe risk modeller AIR Worldwide does not provide an estimate for the impacts there.
“The storm continued northwestward across the South China Sea over Sunday, September 16, with wind speeds of about 160 km/h (100 mph),” commented Dr. Peter Sousounis, vice president and director of meteorology, AIR Worldwide. “As it moved toward landfall in mainland China, Mangkhut bypassed Hong Kong and Macau. The center of the typhoon passed 130 km west of Hong Kong and 70 km west of Macau, both of which felts its effects due to a massive wind field; hurricane-force winds extended 160 km from its center and tropical storm force winds extended 510 km from its center. Storm surge was as high as 3.38 meters in Tai Po Kau, Hong Kong.”
As we wrote recently, it’s expected that insured losses in Hong Kong alone could extend to $1 billion, suggesting that AIR’s estimate of up to $2 billion of insurance sector loss for the Chinese territories as well could prove relatively accurate.
Mangkhut made a Category 3 landfall in the populated and economically active region of Guangdong, China, bringing strong winds, heavy rains and a storm surge.
AIR noted that some of the storm surges associated with typhoon Mangkhut are the highest on record in the region, with Quarry Bay and Tai Po Kau experiencing 2.35 meters and 3.38 meters, respectively, surpassing the previous records of 1.77 meters in Quarry Bay from Typhoon Wanda in 1962 and 3.23 meters at Tai Po Kau from Typhoon Hope in 1979.
As a result buildings were inundated and flood damage both from surge and rainfall set to be costly.
Damage to Hong Kong’s skyscrapers is also set to be costly, with windows blown out from many resulting in contents damage.
Additionally, Macau was struck by damaging flooding, while all of its casinos were ordered to close for the first time. Mainland China suffered storm surges, flooding and wind damage to buildings and cars.
In AIR’s estimate that the insurance and reinsurance industry could face up to $2 billion of losses from typhoon Mangkhut’s impacts in Hong Kong, China and Macau, business interruption is only included in Hong Kong and China auto losses are also not factored in, suggesting the eventual industry loss will be higher that this estimate alone suggests..
It’s assumed that the Philippines would add another few hundred million dollars of insured loss to the total, according to media reports.
Typhoon Mangkhut could become the most costly insurance and reinsurance market loss for Hong Kong, but the overall industry loss is expected to be dwarfed by the economic loss across the entire region.
Again, this drives home the fact the protection gap in China and surrounding region is vast, with economic losses from typhoon Mangkhut expected to be multiples of the eventual insurance industry toll.
At the level AIR suggests, there is the potential for some leakage of claims into the ILS market, largely through sidecars, quota shares and other collateralised reinsurance arrangements. However this is expected to be minor according to sources.