In early September, Hong Kong and the Pearl River Delta area, including China’s Guangdong Province and Macau, suffered substantial flooding from a major rainstorm, and AM Best expects the gross loss will not be quite as severe but could come close to rivalling the $400 million in losses from Typhoon Mangkhut in 2018.
The ratings agency warns that these losses could further pressure the upcoming reinsurance renewals during the ongoing hard market environment.
Based on Q4 2022 provisional data, net premiums accounted for 40% of gross property damage premiums, which could increase if reinsurance pricing becomes too expensive for some smaller companies or if some larger players decide to take on more risk, says AM Best.
For context, the trough of low pressure associated with remnants of Typhoon Haikui brought torrential rain and thunderstorms to the Pearl River Estuary, as reported by the Hong Kong Observatory,
The weather station at the observatory headquarters recorded more than 158 millimetres of rain between 11 p.m. and midnight on 7th September, the highest hourly rainfall since recordings began in 1884.
The storm dropped more than 600mm of rainfall at the observatory headquarters in 24 hours. The extreme weather event followed on the heels of Super Typhoon Saola, which battered Hong Kong with strong winds.
AM Best says that losses from the first “black rainstorm” in almost two years will likely be due mainly to property losses, as well as some motor losses. Roughly 15 insurance companies account for 51% of the $2.4 billion in gross premiums in the Hong Kong market for the two lines combined, but 67% on a net basis based on provisional Q4 2022 annual data from the Hong Kong Insurance Authority.
