Best’s Commentary: Reinsurers Likely to Absorb Majority of Typhoon Yagi Losses in Vietnam

SEPTEMBER 12, 2024 02:28 PM (EDT)

Best's Commentary: Reinsurers Likely to Absorb Majority of Typhoon Yagi Losses in Vietnam

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FOR IMMEDIATE RELEASE

SINGAPORE - SEPTEMBER 12, 2024 02:28 PM (EDT)
AM Best expects the bulk of losses resulting from Typhoon Yagi on Vietnam insurance companies to be borne by domestic and international reinsurers, according to a new commentary. Consequently, reinsurers' appetite for regional catastrophe risks could be tested again in upcoming reinsurance renewals.

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 Chris Lim, associate director, 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 limited take-up of business interruption coverage.

To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=346592.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.