Best’s Commentary: Mindanao Earthquake Expected to Impact Philippine Insurers’ Results in Second-Half 2026

SINGAPORE--(BUSINESS WIRE)--Due to the catastrophe protection gap in the Philippines, insured losses from damage caused by a recent 7.8-magnitude earthquake in the Mindanao region are expected to be limited and a small fraction of total economic damage, according to a new AM Best commentary.

The Best’s Commentary, “Mindanao Earthquake Expected to Impact Philippine Insurers’ Results in Second-Half 2026,” notes that while the full scope of insured losses remains subject to ongoing assessments and is not yet quantified, AM Best expects that the domestic non-life insurance market will absorb the primary layer of exposure through a risk-sharing programme involving direct policies and the Philippine Catastrophe Insurance Facility (PCIF), which was established to pool domestic catastrophe risk.

In addition, the commentary notes that insurers in the Philippines are dependent on global reinsurance market for transferring extreme earthquake risks; consequently, international reinsurers are expected to absorb a share of the overall insured losses. Although the total is expected to be low, the event highlights primary-reinsurance market dynamics. “An increase in net retention of catastrophe risks in recent years by primary Philippine insurers is a strategic response to balance high reinsurance costs with profitability targets. Consequently, this shift has heightened sensitivity to climate risks and exposed inaccuracies in traditional risk models due to the inherent uncertainty associated with climate change, could lead to elevated underwriting volatility,” said Susan Tan, senior financial analyst, AM Best.

While gross premiums written have been consistently rising in recent years, according to the commentary, so has the average combined ratio. Claims volatility, together with higher administrative costs, may offset premium gains and impact overall earnings.

“The earthquake and the difference in insured and economic losses makes the case for disaster financing for the region to build up resilience to such events. The event underscores the importance of catastrophe risk management for insurers - a greater risk for insurers would be if an event happens in one of the more commercial centers in the country, such as Manila,” said Victoria Ohorodnyk, senior director, analytics, AM Best.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=365609.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising 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. For more information, visit www.ambest.com.

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