Extreme weather is the new normal, say insurance experts

Extreme weather is the new normal, say insurance experts | Insurance Business Asia

Extreme weather is the new normal, say insurance experts
Asian businesses are likely to have insufficient insurance cover, leaving them vulnerable to increasingly common extreme weather events, according to experts.

In the global picture, the 10-year average for economic losses caused by natural catastrophes is at around US$163 billion, according to data from Swiss Re.

“Comparing this against the average for insured losses of US$46 billion, we can see an insurance gap of US$117 billion or 72%,” Lei Yu, managing director of Marsh Hong Kong and Macau, told the South China Morning Post.

“While some losses may not be insurable, businesses evidently lack sufficient coverage for natural catastrophes.”

Meanwhile, in Asia, Typhoons Hato and Pakhar cost Hong Kong insurers at least HKD1 billion (US$130 million) in claims for damages in Hong Kong, Macau, and southern China.

“Economies across Asia need to address their financial disaster readiness if they are to cope with the fallout from events that are both more frequent and more costly. Insurance coverage is a powerful component of disaster risk management, ensuring that firms have sufficient liquidity to manage any disruption,” Yu said, noting that Asian companies are less likely to take out insurance coverage than North American firms.

 Chan Kin Por, a Hong Kong legislator for the insurance sector, said that the record-high claims serve as a wake-up call for Asian businesses to ensure that they have sufficient cover against natural catastrophes.

“The damage caused by the hurricanes in the US and the typhoon in Hong Kong and Macau this year was huge. It is going to lead companies to be aware of the danger and to buy the coverage,” Chan said.

Even as claims skyrocket, Chan said that insurance premiums are unlikely to rise in a similar manner.

“There may be some adjustment up of the price but it is not likely to be substantial,” said Chan. “The heavy payouts are usually absorbed by large international insurance companies. They should be able to absorb the loss and have no urgent need to raise insurance premium substantially.”


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