The damages caused by Typhoon Hato will only have a moderate impact on the earnings and financial strength of general insurers in Macau, according to a report by ratings agency A.M. Best.
Hato, which reached Category 2 on the Saffir-Simpson Scale, made landfall just north of Macau on August 23. It was the strongest typhoon to strike the region in the past 53 years, causing massive damage to Macau and neighbouring Hong Kong due to strong winds and flooding. Several districts were also left without electrical power for 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 capitalization,” the report said.
Most of the gross losses are expected to be in the commercial property and business interruption segment. However, most of these losses, especially for Macau’s expansive casino sector, are ceded to the international reinsurance market, softening the blow locally.
The report also added that personal insurance awareness in the special administrative region is quite low. Data from the Macau Insurers’ Association showed that less than 10% of motor insurance policies are comprehensive, while a huge majority of residential property policies are only for fire risks, and do not cover damage caused by storms and floods.
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