Insurance & Reinsurance
Typhoon Hagibis made landfall in Eastern Honshu, Japan on 12 October, bringing heavy rainfall, flooding and mudslides in rural areas. The Typhoon reportedly affected over 6 million people, leaving thousands without electricity and water for a few days. The potential exposure for insurers from Hagibis is likely to be significant. Hagibis is reported to be as powerful as last year's Typhoon Jebi, but unlike Jebi was concentrated around more populated and industrial areas, so insured losses could be higher (losses from Jebi are estimated to be between USD 13 billion and USD 15 billion).
Weather / entertainment insurance
Three Rugby World Cup matches were cancelled because of Hagibis, with fans set to receive a full refund of the ticket price. Early reports suggest that the tournament's broadcasters might seek compensation from the organisers for lost television revenue. The Japanese Grand Prix also postponed qualifying sessions although the race proceeded as planned. The cancellation of major sporting matches / events highlights the importance of weather related insurance products, particularly in Asia (which is prone to annual natural catastrophes). This type of contingency insurance generally covers direct financial losses resulting from the cancellation or postponement of an event due to circumstances including adverse weather. This insurance is different from a traditional property or business interruption policy because it generally does not require physical damage and insures specific financial losses (like refunded ticket sales). With more large international sporting events coming to Asia, including the Tokyo Olympics next summer, it is a timely reminder for organisers and vendors to consider purchasing appropriate weather related insurance for future events, particularly those taking place during typhoon season.
Reinsurance and loss creep
Hagibis looks likely to generate claims for the excess reinsurance market after September's Typhoon Faxai appears to have eroded deductibles on aggregate excess cover – RMS currently estimates losses from Faxai at between USD 5 billion and USD 9 billion. According to media reports, reinsurers were already talking in September (when Faxai made landfall) about a push for rate increases on loss-hit wind covers of between 25% and 30%. Reinsurers might target higher increases at renewal if Hagibis results in further losses.
Jebi has shown the potential for significant loss creep and this could be expected for Hagibis too. The early estimates for Jebi assessed losses as low as USD 3 billion. In February 2019, estimates had increased to USD 10 billion and it is now expected that losses could reach between USD 13 billion and USD 15 billion. Accordingly, overall loss estimates for Hagibis provided over the next few months should be treated with caution.
Underlying claims considerations
Some of the issues which clients might wish to consider when assessing property damage and business interruption claims include the following:
Should you have any queries relating to policy coverage or claims arising from any of the Typhoons, please feel free to contact Nicholas Sykes, who is based in our Singapore office.