Substantial protection gap underpins “huge potential demand for catastrophe insurance protection” in China
Devastating summer floods in the populous province of Henan in central China are a wake-up call for local authorities to seek better insurance cover against natural disasters, reports Reuters.
Regulators and experts say more needs to be done after losses in under-protected Henan swelled to nearly $25 billion, or 4.6% of China’s first-half gross domestic product, due to the floods last month.
The flooding generated extensive damage to property, agriculture and infrastructure across the region. Significant impacts were incurred in the Zhengzhou metropolitan area on July 20 as all-time rainfall records were broken.
Despite high levels of under-insurance, the floods are likely to be Chinese insurers’ most costly natural catastrophe to date, according to Aon’s Impact Forecasting. It estimates flood damage in Zhengzhou will cost insurers up to $1.7 billion.
Globally, insurance covers 30%-40% of economic losses from disasters, with coverage up to 60% in North America. In China, where local experts warn of more extreme weather due to global warming, coverage is just 10%, according to Swiss Re.
“The gap between economic and insurance losses is still sizable (in China) and underpins huge potential demand for catastrophe insurance protection,” according to S&P Global Ratings.
So far, just 15 provinces and cities have signed up for pilot disaster insurance programmes, but more are expected in the aftermath of the Henan floods.
Swiss Re told Reuters it is working on a product that offers quicker assessment for flood-related disasters in China, remotely tapping data - such as the depth of floodwaters and size of affected areas - to gauge the severity of the situation.