But expected losses should not cause regional reinsurance market disruption as areas in China with the highest insurance values have been spared, COO of Aon Benfield Analytics Asia Pacific Rade Musulin tells StrategicRISK
Musulin, whose work on designing the Florida Hurricane Catastrophe Fund in the wake of Hurricane Andrew in 1992 earned him the nickname of ‘Mr Hurricane’ in his native USA, told SR that while Rammasun caused widespread economic losses, the most densely populated areas in China were spared the worst of the storm.
“The storm passed north east of Haikou, Hainan, so the strongest winds and storm surge missed the most populated city on the northern coast of Hainan,” he said.
“Due to the distribution of exposures in China, indications are that this storm affected less affluent areas than [Typhoon] Fitow last year and the insured loss in both countries, in contrast to the economic loss, was not large enough to cause regional reinsurance market disruption.”
Aon Benfield’s latest global catastrophe recap report states that Super Typhoon Rammasun made separate landfalls in the Philippines and China, causing widespread damage and killing at least 206 people and injuring hundreds more.
In the Philippines, total economic damages across the agriculture and infrastructure sectors were listed at PHP10.8 billion ($250 million), while in China, the Ministry of Civil Affairs (MCA) noted that 272,000 homes had been damaged amid total economic losses listed at CNY38.5 billion ($6.25 billion).
Additional flood and wind damage from the super typhoon was reported in Vietnam, leading to total economic losses of VND125 billion ($6.2 million).
Rammasun’s overall economic damage total of $6.5 billion makes it the costliest weather event of 2014 to date.
Nevertheless, Musulin said, catastrophe loss experience (insured) across the Asia-Pacific region to this point in 2014 has not been significant, as Australia, New Zealand, Japan and South East Asian nations have not suffered many serious events.
“Combined with the lack of major hurricanes in the North Atlantic (and most forecasts are for a below average season there), global reinsurance capacity is ample and reinsurers continue to show a strong appetite for business in the region,” he said.
However, Musulin cautioned, we need to be wary of drawing conclusions regarding the relatively mild hurricane season in the North Atlantic to date.
“Recall that the ‘A’ storm in 1992 was ‘Andrew’, which did not become a tropical system until August 17 and did not make landfall in Florida until August 24,” he said, explaining that in the north Atlantic the storms start with A each year (first storm), meaning there were no storms up to this point in the 1992 season and yet one of the most devastating events for the US still happened that year.
The disparity between economic and insured losses, particularly in the Philippines, was driving efforts by the national government and partners to study whether public/private partnerships may be an effective tool to assist in financing and rebuilding after these events, Musulin added.