AM Best: Reinsurers to absorb bulk of Typhoon Yagi losses

Reinsurers are likely to absorb the majority of losses from Typhoon Yagi in Vietnam, according to AM Best, which could potentially test reinsurers’ appetite for regional cat risks at the upcoming 1.1 renewals.

A new report by the rating agency said that reinsurance programs will mitigate the impact on rated non-life insurers’ underwriting performance, thereby preventing capital events.

Catastrophe excess of loss reinsurance programs generally have low attachment points in the region. Insured losses are expected to be much lower than economic losses owing to the low insurance penetration rate in Vietnam.

“Rated companies actively manage their geographic accumulations and have been consistently profitable,” commented Chris Lim, associate director at AM Best.

“However, the impact on underwriting performance may be more significant this time, as more stringent reinsurance terms and conditions are likely to result in higher net retained losses for cedants.”

Typhoon Yagi made landfall on 7 September, causing widespread damage to northern parts of the country. Hai Phong, which is home to industrial parks that host factories for major multinational and domestic companies, was particularly affected, along with coastal regions near Hanoi.

With property damage to buildings and infrastructure, equipment and inventory, additional insurance losses are expected from the motor and marine lines.

The full extent of business interruption losses is still being assessed, but AM Best expects this to be manageable owing to limited take-up of the coverage.

Parametric Insurer reported earlier this month that aquaculture, sugarcane and rubber farms had received compensation after parametric policies were triggered by Super Typhoon Yagi making landfall in Southern China.