Insured losses from Kathmandu riots rise sharply, says AM Best

Domestic reinsurers also face capital strain.

Insured losses from the recent “Gen Z” riots in Kathmandu are expected to be significant, adding pressure to Nepal’s small non-life insurance market, according to AM Best.

In a new commentary, AM Best said that whilst many damaged assets are likely to be uninsured, riot, strike, malicious damage, sabotage and terrorism (RSMDST) risks are typically covered under policy extensions.

Gross insured losses reported by the Nepal Insurance Authority are already comparable to those from the 2015 earthquake.

“The outsized proportion of losses arising from widespread riots highlights the likelihood of earnings and capital impacts on the market, especially if claims continue to escalate,” said Susan Tan, senior financial analyst, AM Best.

Domestic reinsurers also face capital strain, AM Best warned. Whilst retrocession may provide some relief, high retention of RSMDST risks could still weaken capital buffers and limit resilience to further shocks.