Best’s Commentary: Nepal’s Catastrophic Floods Pressure a Thinly Insured Market

SINGAPORE--(BUSINESS WIRE)--AM Best expects insured exposure from damage in the catastrophic Nepal floods to be concentrated in a number of commercial risks, including hydropower generation assets, engineering and construction covers tied to infrastructure projects and commercial property along the impacted trade corridor.

In its Best’s Commentary, “Nepal’s Catastrophic Floods Pressure a Thinly Insured Market,” AM Best states that overall insured losses are expected to be modest relative to economic losses, primarily because insurance penetration in Nepal remains among the lowest in Asia. Losses in commercial lines are likely to be more material for individual carriers and their reinsurance counterparties than for the market in aggregate, given the outsized sums insured typical of hydropower and infrastructure risks. Motor and marine cargo lines with exposure to cross-border trade disruption may also see moderate claims activity as the Gyirong crossing remains inoperable.

Insurers offering travel insurance covers with exposure to Nepal are also likely to see an uptick in claims tied to trip cancellations, curtailments, and emergency medical evacuations, given that the affected districts are popular tourist destinations.

“Nepal’s non-life insurance market relies heavily on global reinsurance capacity to underwrite catastrophe risks, and so international reinsurers are expected to absorb a significant share of the overall insured losses,” said Victoria Ohorodnyk, senior director, head of analytics, AM Best. “However, claims development on hydropower and engineering risks warrants close monitoring over the coming quarters.”

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=368025.

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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