Rated non-life insurance companies in Macau are expected to be able to withstand the losses driven by Typhoon Hato, which made landfall north of Macau as a Category 2 typhoon on the Saffir-Simpson Scale on the 23rd of August, 2017, with much of the loss being passed to reinsurers, according to A.M. Best.
The international financial services rating agency expects Hato losses to have a moderate impact on companies’ earnings but with a minimal impact on their financial strength. Hato struck an Asian casino hub, and was the strongest storm to hit the region in more than 50 years.
“While it is premature to predict the total insured loss to the industry, A.M. Best expects that the storm will have limited rating impact given their conservative reinsurance arrangements, low penetration of natural catastrophe coverage on personal lines and robust capitalization,” says A.M. Best.
Hato caused widespread damage to the city, bringing strong winds and flooding, and also left major areas of the city without electricity for 24 hours.
The majority of the loss is expected to come from commercial property and business interruption losses, says A.M. Best, with the majority, and in particular the casino risks, being ceded to the global reinsurance market.
A.M. Best explains that personal insurance awareness in the region is very low, with just a single digit of motor policies being comprehensive policies, according to the Macau Insurers’ Association. Furthermore, the majority of residential property insurance are fire only policies, which fail to cover flood and water damage.
This again highlights the protection gap in many parts of the world, and especially in parts of Asia. While the majority of businesses have protection and will be able to call on their reinsurance protection for the losses, residential and motor losses have the potential to be high, underlining a need for increased awareness of insurance and reinsurance solutions to boost penetration.
