The southern Chinese provinces of Guangdong, Guangxi, and Fujian, as well as those in the Yangtze River basin, such as Hubei, Hunan, and Jiangsu, have experienced heavy rainfall since early June. More than 140 people have died or are missing, while around two million residents needed to be evacuated, according to the Ministry of Emergency Management. The floods have resulted in direct economic losses of over RMB69.6 billion (US$9.96 billion), the ministry said.
Despite low overall penetration rates for catastrophe coverage, events such as typhoons or flooding pose threats to Chinese insurers’ financial viability, the report said. Insurers generally manage their catastrophe risks, including flooding, through active monitoring of risk accumulation and reinsurance protection.
However, Fitch cited that limited claims statistics, the increased frequency of extreme weather events, and the geographical diversity in China hinder insurers’ ability to improve their pricing and modelling capabilities for flood-related risks. Nonetheless, Fitch said that, depending on the reinsurance structure and coverage limits, it expects direct insurers to recover part of their insured losses from the floods from reinsurers.
With the rainy season still ongoing in certain parts of China, flood claims are still expected to come in. Data from Chinese insurance regulators shows that insurers in the Hubei, Guangxi and Jiangxi provinces have reported aggregate incurred losses of more than RMB500 million (US$71.5 million) as of July 09, composed of motor, agricultural, and property insurance claims.
In 2016, heavy flooding also caused significant losses to Chinese non-life insurers, with insured losses exceeding RMB4 billion (US$570 million).