AM Best expects the Mindanao earthquake to generate multi-line economic losses, particularly from damage to property and infrastructure, but anticipates insured losses will represent only a small fraction of total economic damage due to the catastrophe protection gap in the Philippines.
On 8th June 2026, a magnitude 7.8 earthquake struck the southern Philippines, which AM Best expects will result in a multi-line claims event for insurers and reinsurers with exposures on the island of Mindanao.
The ratings agency expects that damage to commercial and residential properties, coupled with significant infrastructure disruption, will affect multiple lines of business within a commercially significant area.
The domestic non-life insurance market is expected to absorb the primary layer of exposure through a risk-sharing programme involving direct policies and the Philippine Catastrophe Insurance Facility (PCIF). The PCIF was established to pool domestic catastrophe risk and reduce the market’s historical reliance on offshore reinsurance capacity.
AM Best noted that insurers in the Philippines are dependent on the global reinsurance market to transfer extreme earthquake risks, and said the event could prompt reinsurers to reassess their earthquake models and risk appetite.
However, the ratings agency does not expect a significant change in risk appetite for non-affected regions in the short term.
“An increase in net retention of catastrophe risks in recent years by primary Philippine insurers is a strategic response to balance high reinsurance costs with profitability targets. Consequently, this shift has heightened sensitivity to climate risks and exposed inaccuracies in traditional risk models due to the inherent uncertainty associated with climate change, could lead to elevated underwriting volatility,” said Susan Tan, senior financial analyst, AM Best.
AM Best also highlighted that while gross premiums written have been consistently rising in recent years, so has the average combined ratio. Claims volatility, combined with higher administrative costs, could offset premium gains and impact overall earnings.
“The earthquake and the difference in insured and economic losses makes the case for disaster financing for the region to build up resilience to such events. The event underscores the importance of catastrophe risk management for insurers – a greater risk for insurers would be if an event happens in one of the more commercial centres in the country, such as Manila,” said Victoria Ohorodnyk, senior director, analytics, AM Best.
