S&P Global Ratings has warned frequent severe weather events could strain Chinese property and casualty (P&C) insurers’ earnings, and force the industry to reassess its catastrophe and reinsurance strategies. 

The rating agency issued the warning after Beijing experienced its heaviest rainfall in 140 years as remnants of Typhoon Doksuri pounded the capital and surrounding areas late last month. 

State media reported several districts in the capital were flooded and more than 50,000 residents were evacuated. The torrential downpours also broke many local meteorological records. 

The rain has stopped for now, but weather forecasters are tracking another typhoon that entered the East China Sea last week. Khanun, the third major typhoon to hit East Asia, has already damaged homes and disrupted power supplies in Okinawa and other southern Japanese islands. 

“Catastrophe season, which typically unfolds in the third quarter of the year, is not yet done,” S&P Global Ratings Credit Analyst Wenwen Chen said. 

“More extreme weather events may yet squeeze the underwriting results of the country’s P&C sector.” 

S&P says the Beijing weather event will result in just a modest hit to the sector, and could bolster demand for catastrophe insurance coverage. 

“The Beijing government’s early warnings ahead of the recent flooding helped prepare and mobilise the public about the heavy rainfall,” the rating agency says. 

“As such, insurance claims related to the flood have been modest despite the severity of the event and Beijing’s economic contribution to the country.” 

Motor insurance will likely continue to be a major contributor to the claims, as has been the case in other flooding events. 

But the long-term fallout from extreme weather events on insurers is unmistakable. 

“As extreme weather becomes more frequent, we expect China’s P&C insurers will scrutinise their retained catastrophe exposure and reinsurance arrangements,” S&P says. 

“Moreover, rising reinsurance costs could curtail P&C insurers’ insurance margin.”