China’s extreme weather raises alarm about the country’s disaster insurance gaps

China’s insurers need to catch up, particularly in addressing emerging risks associated with climate change, insurance industry specialists say

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Water gushes out from the Three Gorges Dam through nine of its flood discharge gates to spare more capacity for incoming floods from upper reaches of the Yangtze River, in central China’s Hubei Province, July 15, 2024. Extreme weather triggered is setting off alarm bells in China’s insurance sector, the world’s second largest, which urgently needs more financial tools to mitigate risks from the economic damage wreaked by the growing incidents of droughts, floods and landslides across the country. Photo: Xinhua

Published: 10:30am, 22 Jul 2024Updated: 12:26pm, 22 Jul 2024

Extreme weather triggered is setting off alarm bells in China’s insurance sector, the world’s second largest, which urgently needs more financial tools to mitigate risks from the economic damage wreaked by the growing incidents of droughts, floods and landslides across the country.

Despite recent progress from the government and the insurance companies in compensating for losses from natural disasters, China, which already lags developed countries in insurance penetration, needs to do more in expanding catastrophe insurance coverage, insurance industry specialists said.

“There are areas where China’s insurers need to catch up, particularly in addressing emerging risks associated with climate change,” Peggy Ding, placement leader at Marsh China, told the Post last week.

As more frequent extreme weather events, induced by climate change, are expected to become the “new norm”, insurers need to develop innovative insurance products that can effectively respond to these risks, she said.

FILE PHOTO: A drone view shows flooded areas along an overflowing river following heavy rainfall in Pingjiang county of Yueyang, Hunan province, China July 2, 2024. Extreme weather triggered is setting off alarm bells in China’s insurance sector, the world’s second largest, as it needs to mitigate risks from the economic damage wreaked by the growing incidents of droughts, floods and landslides across the country. Photo: Reuters

This is a timely reminder as a series of natural disasters hit China, where only around 10 per cent of the losses from natural disasters are covered by insurance, compared to the global average of 40 per cent, according to data from National Financial Regulatory Administration (NFRA).