News eDaily28 Aug 2017

Macau:Typhoon Hato expected to have moderate impact on insurers' earnings

28 Aug 2017

Rated nonlife insurers in Macau will be able to withstand the Typhoon Hato losses with moderate impact on earnings but limited effect on their financial strength, according to A.M. Best.

Typhoon Hato (category 2 on the Saffir-Simpson Scale) made landfall just north of Macau, an Asian casino hub, on 23 August. The typhoon is the strongest storm in 53 years and caused massive damage to the city from strong winds and flooding, as well as leaving major districts without electricity for at least 24 hours.

While it is premature to predict the total insured loss to the industry, A.M. Best expects that the storm will have limited rating impact given their conservative reinsurance arrangements, low penetration of natural catastrophe coverage on personal lines and robust capitalisation.

It is expected that the majority of the gross losses will come from commercial property and business interruption losses. However, most of these risks (especially the casino risks) are ceded to the international reinsurance market. Personal insurance awareness is very low, as only a single digit of motor policies are comprehensive policies according to Macau Insurers’ Association, and the vast majority of the residential property insurance are fire only policies that do not cover water damage and flood.

Meanwhile, over in Hong Kong, market analysts put the economic cost caused by Hato to the city at anywhere between HK$4 billion (US$512 million) and HK$8 billion. The stock market in the territory was paralysed, most businesses closed, flights cancelled and public transport suspended, reported South China Morning Post.


 

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