According to AM Best, domestic and international reinsurers will bear the bulk of losses caused by Typhoon Yagi on Vietnam insurance companies, which can further result in reinsurers’ appetite for regional catastrophe risks being tested at the upcoming reinsurance renewals.
Typhoon Yagi, which has been called Asia’s most powerful storm this year, made landfall on September 7th, 2024, causing widespread damage to northern parts of the country; in particular, in Hai Phong, which is home to industrial parks that host factories of major multinational and domestic companies, and in coastal regions near Hanoi.
The Best report, “Typhoon Yagi Likely an Earnings Event for Vietnam’s Non-Life Insurers,” states that reinsurance programmes would mitigate the impact on rated non-life insurers’ underwriting performance, likely preventing capital events.
Catastrophe excess of loss reinsurance programmes generally have low attachment points, effectively transferring losses to reinsurers.
Simultaneously, insured losses are expected to be much lower than economic losses given Vietnam’s low insurance penetration rate.
Chris Lim, Associate Director, AM Best, commented, “Rated companies actively manage their geographic accumulations and have been consistently profitable. However, the impact on underwriting performance may be more significant this time, as more stringent reinsurance terms and conditions are likely to result in higher net retained losses for cedents.”
Equipment and inventory were also destroyed from property damage to buildings and infrastructure, with additional insurance losses expected from the motor and marine lines too.
AM Best expects the impact to be manageable given the limited take-up of business interruption coverage while the full extent of business interruption losses is still being assessed.
