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Hong Kong’s Floods Will Seemingly Hit Insurers’ Earnings, Might Transfer Reinsurance Renewals



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The current devastating floods following Tremendous Hurricane Saola in Hong Kong and different components of China could add additional stress to the upcoming reinsurance renewals in January, in keeping with an AM Greatest commentary.

The general impression of the rainstorm is more likely to be extra of an earnings occasion for insurance coverage firms than a cloth hit to capital adequacy, stated the report titled “Hong Kong 1-in-500 Yr Flood More likely to Have an Earnings Impression.”


Describing the occasion on Sept. 7-8, 2023, AM Greatest stated a serious rainstorm hit Hong Hong and the Pearl River Delta space (together with China’s Guangdong Province and Macau). The storm dropped 1 / 4 of Hong Kong’s annual rainfall whole in 24 hours – greater than 600 millimetres – or 23.6 inches. The storm was referenced as a 1-in-500-year occasion.

The gross losses on property and auto traces won’t be fairly as extreme however may come near rivaling the HK$3.1 billion (US$400 million) in losses introduced by Hurricane Mangkhut in 2018, stated the report.


Fifteen insurance coverage firms account for roughly 51% of the HK$18.9 billion (US$2.4 billion) in gross premiums within the Hong Kong marketplace for the 2 traces – property and motor – mixed, stated AM Greatest, including that they account for 67% on a web foundation primarily based on provisional fourth quarter 2022 annual knowledge from the Hong Kong Insurance coverage Authority.

“Property harm accounts for 13% of whole basic insurance coverage web premiums (21% on a gross foundation), whereas motor harm constitutes over 10% on a web foundation (8% gross). Complete motor protection, which might cowl the harm from flooding, accounts for a slight majority of motor premium over third celebration, which might not cowl damages from flooding,” the report stated.


The report famous that these losses may add additional stress throughout the upcoming reinsurance renewals, in what’s already a tough market. “Based mostly on fourth-quarter 2022 provisional knowledge, web premiums accounted for 40% of gross property harm premiums, which may enhance if reinsurance pricing turns into too pricey for some smaller firms or if some bigger gamers resolve to tackle extra threat.”

Supply: AM Greatest


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