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Natural disaster insurance shifts after two T10 typhoons in Hong Kong

With more severe typhoons hitting Hong Kong directly, insurers are set to examine their natural disaster insurance premium strategies in the Asia Pacific region. Last year’s Hato was hailed as the worst typhoon to hit Hong Kong for years, causing $511 million worth of damage in Hong Kong alone, but it kept it’s badge only until super typhoon Mangkhut, the most severe storm ever recorded in Hong Kong, battered the city-state this September.

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The cost of typhoon Mangkhut

Typhoon Mangkhut battered Hong Kong this September for about 12 hours, with winds reaching over 200 km/h, and causing approx 1,500 trees to fall, nearly 500 shattered windows, and torrential floods. Each day the signal 8 or above is hoisted in Hong Kong, the city loses on average US$627 million a day, not only from the property damage but also business interruption, and costs of cleaning the city after the typhoon passes.

The insurance losses caused by typhoon Mangkhut are estimated to amount to around US$1bn this year, beating Hato’s US$110 million worth of insurance claims. Such a disaster drives claims for property damage, business interruption, and motor insurance, and in effect, natural disaster insurance premiums are expected to rise starting next year.

Natural disaster insurance – where is it headed?

Researchers are already warning that due to global warming, hurricanes are going to become stronger and more severe in the coming years. And, in the case of Hong Kong, every 4 to 5 years a T10 hurricane hits the mega-city, but just in one year’s time, two T10 signals were hoisted. With that in mind and this year’s high insurance payouts, P&C insurers are expected to take action and increase property and casualty business insurance premiums in Hong Kong as their risks are increasing too.

New business insurance products for natural disasters

Taking into consideration the global warming’s weather predictions and increasing frequency of typhoons, general and P&C insurers will examine their current portfolio of natural disaster insurance offerings and work on new underwriting rules to adapt to the new circumstances.

Parametric or index-based insurance, is a new business insurance product that has been rising in popularity. It provides a payout of a specified amount upon an occurrence of a specific event, such as signal T8 in Hong Kong, regardless of any economic loss sustained by the client. It’s a good solution for companies that already know that their business can’t withstand the effects of signal 8 typhoons or higher, and want the funds to be transferred quickly.

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What type of risks do businesses face during a typhoon?

While it is almost certain that P&C insurers will adjust their underwriting and premiums, business owners and companies should skimp on property and casualty insurance, and definitely not resign from natural disaster insurance options in Hong Kong.

The financial risks related to typhoons or any other natural disaster does not only include damages to the external and internal property, but also extends to liability should anything happen to a third party at your premises. Business interruption also costs you money. Even if your property is not damaged, your employees might be late or unable to report for duty due to transportation difficulties, and supplies necessary to run your business might be affected – all adding to the overall costs; such costs can be sky high:

Industry reports stipulate that in 2017 alone, economic losses from man-made and natural disasters in Asia Pacific and Oceania were US$34.5 billion, while insured losses came up to US$7.1 billion. That leaves US$ 27.4 billion in losses incurred by firms, individuals, and governments themselves.

Typhoon business insurance options for every business

To avoid paying for any typhoon-related damage costs that might affect your company’s day to day business, make sure that you are getting business insurance that covers the expenses related to natural disasters, and typhoons in particular. The safest approach is to have a risk management plan in place; one that can safeguard the company from every angle, whether that’s a natural disaster, fraud, or hacker-attack. Having such plans in place works in your favor when insurers underwrite your company’s risk and premiums.

With the help of an experienced insurance broker, like Pacific Prime Hong Kong, you will be able to assess your company’s risks, and pick the right business insurance solution based on your company’s unique needs. For more information on how we can help you assess your risks and identify your most ideal business insurance solutions, visit our corporate website, or contact us directly for a free chat or a meeting.

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Content Creator at Pacific Prime Hong Kong
Elwira Skrybus is a content writer at Pacific Prime. In her everyday work, she is utilizing her previous social media and branding experience to create informative articles, guides, and reports to help our readers simplify the sometimes-puzzling world of international health insurance.

When she isn’t writing, you are most likely to find Elwira in search of the perfect plant-based burger or enjoying Hong Kong’s great outdoors either at the beach or from the boat - the closer to the sea, the better!