Asia Pacific nat cats: the year in review

December 29 2022 by

2022 has been a year of big nat cat losses around the globe, the Swiss Re Institute estimates the annual losses for the year came in at US$115 billion, much higher than the 10-year average of US$81 billion. However, in Asia Pacific, nat cat losses, despite a few big events, were lower than the average.

Natural catastrophe events in the region were a story in two halves – while the first half saw massive economic losses and insured losses, primarily driven by the floods in eastern Australia and an earthquake in Japan, the second half saw fewer natural catastrophe events and importantly much less economic and insured losses.

For the first six months of the year, nat cats in Asia Pacific accounted for a higher-than-usual US$22 billion of overall natural disaster losses in the first half of 2022, with insured losses coming to US$8 billion, according to a Munich Re report.

Aon’s report on nat cat losses in the region showed that the two biggest contributors were flood damage, US$30.5 billion as of end-October, and earthquake damage US$10.8 billion.

Australian Floods
Australia was at the centre of the nat cat disruptions starting off early in the year with one of the most devastating floods in its history. Loss data specialist Perils said that industry losses from the eastern Australia floods in February-March this year have reached A$6.29 billion (US$4.33 billion), making it “the largest insured catastrophe loss event experienced in Australia” having surpassed the 1999 Sydney hailstorm, which reported A$5.57 billion in losses.

During late February, a monsoon trough was blocked by a high-pressure system across south-east Queensland and northern New South Wales (NSW) regions causing considerable rainfall and associated flooding. In early March, the monsoon trough developed into an east coast low moving south, which caused heavy rainfall along the NSW coast. The combined impact over this period resulted in significant flooding and property damage to several northern NSW regional towns and the surrounding areas of metropolitan Sydney.

The floods earlier in the year was followed by more floods later as the country reeled under a rare triple dip La Nina, which triggered floods in in Southeast Australia, which primarily affected the states of New South Wales, Victoria and Tasmania in October. The insured losses of the October flooding amounted to A$791 million.

While the meteorological conditions of the two events were similar, the October event affected a much less densely populated area and hence losses were significantly lower. Nevertheless, the resulting industry loss was substantial at more than US$533 million and ranked as the fifth-largest flood event loss since 1980, according to data from Perils.

The growing challenge of Australian flood and cyclone losses has forced the government to implement a reinsurance pool for insurance companies to transfer their risk for cyclones and cyclone-related flood damage called the Cyclone Reinsurance Pool, which is backed by an A$10 billion government guarantee. The cyclone pool covers household, strata, and small business property insurance policies.

Japan earthquake
The other big nat cat event that hit the region was the 7.3 magnitude earthquake that struck near the island of Honshu, Japan on March 16. The earthquake caused overall losses of US$8.8 billion and insured losses of $2.8 billion. While most of the losses came from commercial and industrial properties, reports noted that more than 580 buildings in Fukushima prefecture and more than 570 buildings in Miyagi prefecture were damaged. Other impacts from the quake include power and water outages; damage to highways, rail lines, viaducts, and other infrastructure; short-term cancellation of some train services; and significant supply chain and production interruption for the automotive and paper industries.

Another major cat event to hit Japan was the June hailstorms in Sendai, the capital city of Miyagi Prefecture. The unusual storm saw the country’s big three insurers – MS&AD, Tokio Marine and Sompo – incur a combined ¥82.5 billion (US$610 million) in losses.

Asian Typhoons
While it was a relatively quiet year for typhoons in the region, three typhoons that hit South Korea, Japan and the Philippines in September this year wreaked widespread damage.

Typhoon Nanmadol, which made landfall on September 18 in Kyushu prefecture in south-western Japan, was tied for the third-strongest typhoon (by central pressure) to make landfall in mainland Japan since record-keeping began in 1951, after Nancy (1961) and Vera (1959). Despite initial fears of a one trillion-yen loss comparable to Typhoon Jebi, Nanmadol-inflicted losses eventually came in under a billion dollars, according to the latest estimates by Perils.

Meanwhile, Typhoon Hinnamnor which ripped across South Korea’s industrial region in the same month was said to be one of the strongest to hit the country. Economic losses from the typhoon were estimated at over US$332 million across Korea, Japan and the Philippines. However, the typhoon hit Korea’s largest steelmaker Posco’s plant causing losses estimated at US$1.7 billion from closure of its Pohang steelworks, which accounted for some 24% of the group’s total sales.

Though Typhoon Hinnamnor had made landfall in the Philippines, the South-East Asian country was hit most by Typhoon Noru, which came later in the month. The typhoon, known as Karding in the Philippines, was estimated to have cost economic losses of about US$435 million across the Philippines, Vietnam and Thailand.

China drought
A months-long drought in China that peaked in August this year caused much stress across the country’s usually water-rich south.  An unprecedented heatwave has led to droughts in six provinces including Sichuan, Chongqing, Hubei, Hunan, Jiangxi and Anhui. The draught caused drying up parts of the Yangtze River and its tributaries.

According to data from China’s Ministry of Water Resources, the drought-hit area accounted for over 820,000 hectares and affected 160,000 livestock and 830,000 people as of August 17. The six drought-hit provinces are among the largest crop-producing areas of the country.

The droughts have also resulted in a severe power shortage in the Sichuan province and elsewhere. State media reported that hydropower output from Sichuan province has decreased by 50% year on year in mid-August. An Aon nat cat report estimated the economic losses from the drought at over US$8 billion.

South Asian floods
Record-breaking flooding from monsoon rain in Pakistan put the focus squarely on the impact of climate change as the country grappled with prolonged floods that left thousands of people dead, over 3,000km of roads, 130 bridges and almost one million homes damaged, and over 700,000 livestock lost. The city of Sukkur in Sindh province was particularly badly hit as excess rain from upstream coming down the Indus, which flows down the Himalayas, spilled over. The flooding has affected around 33 million people.

The main driver behind the catastrophic floods in the southern part of Pakistan was record monsoonal rainfall. The country observed its wettest July (+180%) and wettest August (+243%) since 1961, with the southern provinces, Balochistan and Sindh, showing monthly anomalies of +450% and +307% in July, and +590% and +726% in August, according to the Aon report.

Economic losses were massive, estimated at over US$5.6 billion by Aon. However, given the low insurance penetration in the country, insured losses were minimal.

India and Bangladesh also saw urban flooding across the countries, with economic losses from flooding estimated at more than US$1.8 billion in India and over US$500 million in Bangladesh.

Nearly all the countries in Asia are facing the brunt of nat cats, especially in the form of secondary perils. While low insurance cover means the losses for (re)insurers remain minimal, with rapid urbanisation and increasing insurance penetration the losses from the region are set to add up in the coming years, especially as climate change is causing an increase in the frequency and severity of catastrophes.

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