Fitch: Flood Claims to Pressure Chinese Insurers’ Margins

published on July 17, 2020

Just how bad are things um yeah i mean um uh in fact i mean china is exposed to the risk of fronting every year for this year uh chinese actually is experiencing unusually intense rainfall since early

June in many provinces and rainstorm alerts will be issued for several weeks in certain regions and then we've seen that about the water level of many reaper actually

Is consistently rising to the warning level and then i mean heavy rainfall from um i mean early june result in severe floods uh you know widespread regions

Throughout china and regions in southern china such as guantanamo province and the area of yankee river basement including province of bube hulan and chiang shu actually

Has been adversely affected and according to the minister of emergency management the flash actually has about more than 30 million people and more than 140 people have died or music and 2

Million of residents need to be urgently relocated and the the ministry of emergency management also said that the bus actually has resulted in a direct economic loss of

About 70 billion as of uh 10th of july so keeping the fact that the series of heavy rainfall flooding yeah sorry teresa you could carry but carry on i just wanted to ask you

You know how far which of the companies which is likely to be most affected by this and how much clarity is to what's going on on the ground will the claims actually give us

Well i mean um at this point of time there's no official statistic or estimate indicating how much insurance claim unlikely to be under the serious support at the moment but uh according to the local insurance

Regulator insurers uh in ube uh guangxi and jiang shu province has reported the aggregator incurred losses of more than uh 500 million as of july 9 including those

Claims from border agriculture and property insurance and then some local media even report that the claims in quantum problems i mean i could amount to more than 3

Billion but then given the fact that the areas are i mean very affected area of platform and the situation is still developing and and the ring the uh season has not

Uh it's not over yet in certain parts of china to a certain extent we expect that the insurance claim uh is going to further increase in the coming few weeks so i mean uh for those of you on that

Company um i mean if they do have the exposure to i mean those affect the region especially if they underwrite a property or a culture insurance that could be affected in fact i mean if we look at the claims

From uh from uh historical records we've seen that um there's also a severe flood which incurred in 2016 and the insurance claim could be amount to more than

Um i mean four billion so i mean if we just look at the scale of this time i think uh it's like uh the uh the scale of the insurance source is likely to be comparable and uh i mean uh our

Initial i mean uh estimate is that the overall claim are likely to exist by billions i mean in terms of rnp and that uh to certain extent represent about 04 percent of the

Direct union written in monday in 2019 so terrence would it warrant a review of the credit ratings of some of these insurance companies who's most at risk well i i guess at this point of time it

Might be uh too early to to tell as the claim are still developing and then um i i guess um what we need to do is to closely monitor how the claims develop and and whether

Which are severely affected by you know the the i mean uh in terms of the exposure uh in those areas but we think that um i mean uh those insurers which have high

Concentration uh i mean on the property as well as the agriculture insurance in the affected region could be uh i mean that could be affected but uh

Uh i mean uh to certain extent i think uh this is likely to um i mean uh to be an event uh to be a earning event rather than to have a severe capital implication to some of the insurers at

This point of time terence there is a sense that there is a lack of flood analytics in china that could help insurers and re-insurance what's your take on it what needs to be done

Um i i guess um i mean uh if if we just look at the insurance arrangement the company are adopting uh at this point of time i guess um uh what what we our observations uh the

Insurance company insurance company they are actively monitoring the risk exposure or the risk accumulation in each region and then they have to i mean the model this

Accumulation or you know the risk exposure according to the underwriting capacity and if the company are able to i mean fine tune their i mean the mechanism of the risk monitoring

System i think to a certain extent that could i mean improve their underwriting volatility

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