Typhoon Mangkhut's trail of destruction across Hong Kong and south China looks set to escalate Hong Kong-based insurance claims, pushing the industry back into underwriting loss, says S&P Global Ratings. The compounded effects of wind and storm surges will likely drive claims for property damage, business interruption, and autos. Furthermore, the inward reinsurance from Macau will further propel underwriting loss.
News reports indicate that total insurance losses from Mangkhut in Hong Kong could amount up to US$1bn. After two consecutive years of severe typhoon-related losses--Typhoon Hato struck southern China in August 2017--S&P anticipates some premium rate hikes as insurance companies address the increased frequency of weather-related claims. Property and auto insurance will likely see higher rates.
"The increasing frequency and severity of typhoons is likely to make insurers scrutinise their portfolios and review catastrophe reinsurance arrangements," said S&P Global Ratings credit analyst Ms Eunice Tan.
Hong Kong and its neighbouring cities in southern China are among the most populous spots in the world. Although affluent, the residents' catastrophe risk awareness remains relatively low.
S&P expects the losses to mostly hit earnings for rated insurance and reinsurance companies, rather than affect capital strength, given their robust capitalisation and sufficient reinsurance cover. The degree of underwriting losses will likely vary among insurers. Business interruption claims from Macau casinos and big Hong Kong corporates could potentially be covered by the international reinsurance market.
Typhoon Mangkhut is one of the most powerful storms in Asia-Pacific since the 1980s with sustained wind speeds of above 200 km per hour. Compared to 2017's Typhoon Hato, Mangkhut's damages to Hong Kong, Macau and the Philippines appear to be more severe. The international credit rating agency says that the losses from Mangkhut would have been more devastating if not for the lessons from Typhoon Hato.
Hong Kong authorities announced that there were about 1,500 fallen trees, nine cases of serious flooding, and nearly 500 broken windows. These numbers are double those reported after Typhoon Hato. In addition, record storm surges were observed through the 10-hour duration for typhoon signal 10, damaging some piers and affecting all modes of transportation.