, China
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S&P Global: Strong rains could drag China’s P&C underwriting performance

Beijing’s recent heaviest rainfall in 140 years serves as a stark reminder to P&C insurers in China.

The extreme rainfall in Beijing as of 2 August has led to property and casualty (P&C) insurance claims to reach RMB166.2m, signalling a “wake-up call” to China’s insurers, said S&P Global Ratings.

This is considerably less than the RMB12b in insurance losses incurred from flooding in Henan province about two years ago, which resulted in record single-event insurance losses in China. 

"More extreme weather events may yet squeeze the underwriting results of the country's P&C sector," said S&P Global Ratings credit analyst WenWen Chen

The overall effect on the sector's combined ratio was approximately 1.0%.

Beijing recently experienced its heaviest rainfall in 140 years, serving as a stark reminder to P&C insurers in China about the increasing risk posed by frequent catastrophic events. 

S&P Global Ratings predicts that this event will only slightly impact the P&C insurance sector, potentially boosting demand for catastrophe insurance coverage.

Although the rain has ceased in Beijing, the heavy rainfall is now moving towards the northeastern region of China. If more extreme weather follows, it could further negatively affect P&C insurers' underwriting performance.

In contrast, the impact of the Beijing event has been milder. 

The proactive flood warnings from the Beijing government helped prepare and mobilise the public, minimising insurance claims despite the severity of the flooding and Beijing's economic significance.

ALSO READ: China receives 260,600 flood-related claims

To mitigate the economic consequences of severe weather, we anticipate increased collaboration between local governments and the insurance sector to safeguard residents and their assets. 

This involves bolstering awareness through catastrophe insurance programs.

Motor insurance is likely to remain a primary source of claims, consistent with previous flooding incidents. 

This trend coincides with a rise in motor insurance claims in China due to the normalisation of traffic following the easing of COVID-19 mobility restrictions.

As extreme weather occurrences become more frequent, China's P&C insurers are expected to reassess their retained catastrophe exposure and reinsurance agreements. 

Additionally, the growing cost of reinsurance could impact P&C insurers' insurance margins.

“Catastrophe season', which typically unfolds in the third quarter of the year, is not yet done." Chen said.


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