As Typhoon Haishen continues to track toward the Korean Peninsula, forecast to reach Category 4 status as it approaches southern Japan’s Kyushu island, there’s potential for a relatively significant insurance and reinsurance industry loss.
For a peninsula that typically experiences just one landfalling typhoon a year, Haishen threatens to be the third landfalling storm in the region over the past two weeks.
After the impacts of Typhoon Bavi, which brought strong winds and rainfall to North and South Korea in late August, Typhoon Maysak continued to intensify, reaching typhoon strength on August 29th before reaching peak intensity on September 1st as a Category 4 storm, packing sustained winds of 145 mph.
In the early hours of Wednesday, September 3rd, Typhoon Maysak made landfall on the southern coast of Busan, South Korea, as a Category 2 storm with sustained winds of 110 mph.
The storm forced the closure of ports in the region and is believed to be responsible for the sinking of a cargo ship in south-western Japan, with local reports noting damage to vehicles and infrastructure.
But the worst might not be over for the region, as following fast on the heels of Typhoon Maysak is Typhoon Haishen, which is forecast to become a very severe storm as it intensifies over warmer waters on its way to the same region of South Korea battered by Maysak.
On its current path, Haishen is expected to pass close to the southern tip of Japan’s Kyushu island with sustained winds of almost 140 mph, putting the storm at Category 4 strength. Some of the forecast models are showing a larger and more severe storm that Typhoon Jebi in 2018, so insurance and reinsurance firms will be keeping a close eye on the storm as it develops.
On its current trajectory, the storm isn’t expected to make landfall in Kyushu, although the eye is anticipated to be fairly close to cities such as Kagoshima, Nagasaki and Kumamoto, bringing strong winds and rainfall.
You can see typhoon Haishen’s current position and forecast path below:
After Kyushu, however, Haishen is forecast to head towards South Korea with a possible landfall in the same region as Maysak as a Category 2 or potentially Category 3 storm, with sustained winds of at least 97 mph.
Of course, the intensity of the storm as it interacts with land and also the location of landfall will be a key driver of potential insurance and reinsurance industry losses. However, analysis by Adapt Ready claims that the two storms pose a significant threat to Korea’s $120 billion+ of semiconductor and automotive export industries.
Based on the latest real-time analysis from the company’s Risk Intelligence Platform, Adapt Ready highlights the potential for major business interruption (BI) / contingent business interruption (CBI) implications for the region’s largest industries.
“As with all storms and major events the initial estimates always centre around the damage to property but our platform is highlighting the harder to see risks that will come down the line such as BI / CBI and flooding,” says Adapt Ready.
According to the firm, Korea’s $23.1 billion automotive parts industry, as well as its $94 billion semiconductor exports industry, are set to feel the full force of the storms.
The analysis finds that in the high impact zones, sits some 472 semiconductor firms and 426 automotive final assembly/parts supplier companies. When the focus shifts to the high impact zones of Haishen, these numbers rise to 653 and 578, respectively.
Additionally, Adapt Ready warns that numerous tier-1 suppliers are in the impact zones of both storms, which has the potential to result in supply chain issues to larger firms such as Ford, Samsung, Hyundai, and General Motors.
Furthermore, more than 2,600 manufacturing plants sit within 1km of a river or coastline, highlighting the significant threat of storm surge and flooding as well as the wind impact.
“There will also be a “double edged” impact to the supply chains of raw materials and finished goods, both in automotive and semiconductor industries, causing long term product availability issues,” says Adapt Ready.
So, it seems that the Pacific typhoon season is gaining momentum alongside an active Atlantic hurricane season. Threatened with an elevated level of landfalling storms in both the Atlantic and the Pacific in 2020, the events of 2017 and 2018 will be fresh in the minds of insurers and reinsurers.
