The bulk of losses resulting from Typhoon Yagi claimed on Vietnam insurance companies is expected to be borne by domestic and international reinsurers, according to a new commentary by AM Best.
The Best’s Commentary, “Typhoon Yagi Likely an Earnings Event for Vietnam’s Non-Life Insurers”, states that reinsurance programmes will mitigate the impact on rated non-life insurers’ underwriting performance, likely preventing capital events. Catastrophe excess of loss reinsurance programmes generally have low attachment points, effectively transferring losses to reinsurers. At the same time, insured losses are expected to be much lower than economic losses given the low insurance penetration rate in Vietnam.
“Rated companies actively manage their geographic accumulations and have been consistently profitable,” said Mr 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 cedents.”
Typhoon Yagi made landfall on 7 September 2024, causing widespread damage to northern parts of the country; in particular, in Hai Phong, which is home to industrial parks that host factories of major multinational and domestic companies, and in coastal regions near Hanoi. Apart from property damage to buildings and infrastructure, equipment and inventory were also destroyed.
Additional insurance losses are expected from the motor and marine lines as well. The full extent of business interruption losses is still being assessed, but AM Best expects the impact to be manageable given the limited take-up of business interruption coverage.
Economic losses of over $1.6bn
Vietnam’s Minister of Planning and Investment Nguyen Chi Dung said at a government meeting yesterday that Yagi caused damages totalling VND40tn ($1.63bn) in northern localities and might reduce Vietnam’s 2024 GDP by 0.15 percentage points. The death toll from the typhoon has exceeded 250 with many people still missing.
Southeast Asia
Human and material losses due to Typhoon Yagi, which impacted Southeast Asia between 1 and 8 September, have increased rapidly in recent days, said Aon in its “Weekly CAT Report” dated 13 September. The Philippines, southern China, and northern Vietnam were among the hardest hit. The death toll has exceeded 370 fatalities and total economic losses are likely to reach billions of US dollars, with the majority of losses originating from China’s Hainan Province.