Slight impact from snowstorms on China P&C sector: Moody’s

The impact from the worst snowstorms in 50 yeas on China's insurers' profitability and capitalization will not be significant, according to a new report.

China's industrial production growth slowed in the first two months of the year as ferocious snowstorms hit factory output, cut power supply and destroyed crops.

The report, from Moody's Investors Service, examines the impact of January's snowstorms on China's property & casualty (P&C) insurance industry. It notes that the adverse impact from the storms on insurers' profitability and capitalization will be modest because of the thus far relatively low insured loss.

Daniel Wong, a Moody's Associate Analyst and author of the report, said: "While the snowstorms are expected to be among the costliest catastrophes in China's recent history in terms of economic loss, China's insured loss, as a percentage of total economic loss in the event of catastrophes, has been very low -- as is the case with other developing countries.’

"According to the China Insurance Regulatory Commission, insurance claims paid as a result of the storms as of March 1, 2008 only amounted to CNY 1.97bn (£140m), accounting for about 1.3% of the total economic loss," said Wong.

However, the report also notes that China's flood and typhoon season has not yet arrived, which is the season where typically the most destructive natural disasters are visited on the country. During the last 30 years, 9 of China's 10 most devastating natural catastrophes occurred over the June-August period.

"As a result of the snowstorms, insurers' profitability will deteriorate this year, but the degree will depend on whether more severe catastrophes will occur over the coming months," added Wong.