Victoria Ohorodnyk, Senior Director, Head of Analytics, AM Best, explains that international reinsurers are expected to absorb a significant share of the overall modest insured losses from the devastating flash floods in Nepal, driven by the fact the country’s non-life insurance market relies heavily on reinsurance capacity to underwrite catastrophe risks.
In its commentary, “Nepal’s Catastrophic Floods Pressure a Thinly Insured Market,” AM Best discloses that overall insured losses are expected to be modest relative to economic losses, primarily because insurance penetration in Nepal remains among the lowest in Asia.
To recap, on 26 August 2026, a Himalayan glacier and rock collapse near the Nepal-China border triggered flash flooding along an approximately 70-kilometre stretch of the Trishuli River, devastating communities across the Rasuwa and Nuwakot districts, resulting in significant humanitarian and economic losses.
The disaster caused severe damage to the Gyirong Port crossing, a corridor that handles a substantial share of the Nepal-China trade. Critical infrastructure, including hydropower facilities, other infrastructure, property, and engineering projects, sustained significant structural damage.
The floods are expected to cause multi-line economic losses, specifically commercial. However, due to low insurance penetration, insured losses are expected to remain significantly lower.
The report said, “Losses in commercial lines are likely to be more material for individual carriers and their reinsurance counterparties than for the market in aggregate, given the outsized sums insured typical of hydropower and infrastructure risks. Motor and marine cargo lines with exposure to cross-border trade disruption may also see moderate claims activity as the Gyirong crossing remains inoperable.”
Overall, Nepalese non-life re/insurers will generally face limited net retained losses and see near-term balance sheet resilience, although claims development on hydropower and engineering risks warrants close monitoring over the coming quarters, warns the report.
The full extent of insured losses remains subject to ongoing assessments and is not yet quantified, explained AM Best.
The report warns that this catastrophe sits as a reminder to a pattern of increasingly frequent and severe natural catastrophe losses in Nepal, including comparable incidents in the region in recent years.
AM Best expects the trend of increased natural catastrophe losses to sustain firmer catastrophe reinsurance pricing at upcoming renewals and support higher demand for facultative reinsurance prospectively.
