Recent flooding in China is expected to cause over US$150m in insured damages, only a tiny fraction of the total economic losses inflected by this catastrophe, according to Swiss Re data, demonstrating the extent of underinsurance in the country in the face of disasters.
In the past two weeks, Hunan, Hubei, Henan and Anhui provinces have experienced heavy downpours, leading to flooding and landslides that destroyed houses, cars, and farmlands.
According to data from the China Insurance Regulatory Commission, the claims from just Hunan and Hebei have already reached US$150m. However, Clarence Wong Shek-fai, Asia-Pacific head of economic research and consulting at Swiss Re, said that only 1.2% of total damage in Anhui and 3.6% in Hubei were insured.
“This showed China is substantially underinsured for natural catastrophes. The New Zealand earthquake in 2011 had 50 per cent of its economic loss covered by insurance policies,” Wong told the South China Morning Post.
Despite this, David Alexander, head of property and casualty reinsurance in Hong Kong and Taiwan at Swiss Re, said that behind the US and Japan, China was the world’s third-largest insurance market in terms of policy premiums. Insurance penetration rate, on the other hand, is a different story. In terms of amount of premiums per capita, China ranks only 40th
The reverse is true in the Hong Kong SAR, which ranks third worldwide in insurance penetration rate, just behind Taiwan and the Cayman Islands.
Things may be looking up for mainland China, though, as Wong thinks that a growing middle class and demand for investment will drive the insurance market further in the coming years. The increase in maximum guaranteed returns, from 2.5% to 4%, also encouraged consumers to purchase insurance, as opposed to wealth management products.
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