PICC seen hardest hit by blizzard claims loss
Natalie Chiu and Enoch Yiu
Insurers pay storm victims 680m yuan
Mainland insurers have paid out 680 million yuan in claims for property losses in the wake of the country's devastating snowstorms, and PICC Property and Casualty is expected to be the hardest hit as the toll mounts.
The China Insurance Regulatory Commission, which yesterday released the latest figures on its website, said last week total claims would reach 3.5 billion yuan, or 0.5 per cent of the industry's premiums in the first 11 months of last year.
The huge payment to the snowstorm victims and lower returns on investments due to the stock-market slump this year would dent earnings of insurers, especially PICC, the country's largest non-life insurer, analysts said.
'With about a 45 per cent market share in non-life insurance, PICC should have the highest risk among the mainland insurers,' said Olive Xia, an analyst Core Pacific-Yamaichi International.
PICC had so far paid out more than 70,000 yuan in individual claims and about 40,000 yuan each in pre-paid claims for the needy during the snowstorms to cover damage to businesses, homes, cars and crops, its spokesman said.
'It's still hard to estimate the total claims,' said the PICC spokeswoman. 'But the amount should be similar to past years. We paid several hundred million yuan during last year's rainstorm.'
Citigroup cut its estimate of PICC's earnings this year 21 per cent to 3.85 billion yuan due to higher losses for the insurer. 'We hold the view that most claims affecting direct insurers will come from a high frequency of small motor insurance claims,' the bank said in a report.
CLSA estimated a 74 per cent drop in PICC's net profit this year if its combined ratio - the percentage of premiums paid out in claims and expenses - is raised to 99 per cent, the highest in recent years.
Rating agency Standard & Poor's predicted the snowstorms would deliver only a slight blow to mainland insurers' profitability.
Meanwhile, leading insurers in Hong Kong have been less affected by the natural disaster.
'Some Hong Kong insurance companies may be asked to pay claims on travel insurance for policyholders who were stranded or suffered damages during the snowstorm,' said Bernard Chan, legislator for the insurance sector. 'However, the aggregate amount will be not alarming.'
Property insurance is usually arranged with firms authorised locally by the mainland insurance regulator. 'It is believed Hong Kong insurers may not be involved directly with the victims, save indirectly by way of reinsurance,' Mr Chan said.
AXA China Region's Hong Kong head John Cai said his firm would honour life insurance claims no matter where the insured died.
'Should we receive any claim regarding a victim of this storm, we will have priority processing to ensure speedy delivery to the beneficiary,' he said. 'From my understanding, the total death toll is very limited. I think the impact on Hong Kong insurers will be minimal.'
Hong Kong Federation of Insurers chairman Michael Huddart said the potential losses for local operators would include reinsurance claims from Chinese insurers, in which case Hong Kong insurers will need to share the payment burden with mainland insurers.
Losses might also occur if some Hong Kong employees working on the mainland were injured, Mr Huddart said. Some companies might also need to pay claims for travel insurance taken out by Hong Kong residents, but the total would not be significant, he said.
'Since only a handful of local insurers are licensed by the CIRC to underwrite domestic risks on the mainland, we do not expect the recent snowstorms to have a significant impact on the industry here,' said a spokesman for the Office of the Insurance Commissioner.