The recent flooding in China is expected to result in insurance claims amounting to 1 billion yuan (HK$1.16 billion), a tiny fraction of the economic losses incurred by the disaster because of a lack of insurance coverage, according to Swiss Re. Heavy rain in the past two weeks led to floods and landslides in Hunan, Hubei, Henan and Anhui, sweeping away houses, cars and inundating farmland. In Hunan and Hebei, the China Insurance Regulatory Commission says claims from the two places have reached a billion yuan. However, the claims represented only 1.2 per cent of the economic loss in Anhui and 3.6 per cent of the damage in Hubei, according to Clarence Wong Shek-fai, the Asia-Pacific head of economic research and consulting at Swiss Re. “This showed China is substantially underinsured for natural catastrophes. The New Zealand earthquake in 2011 had 50 per cent of its economic loss covered by insurance policies,” Wong said. Wong said the major claims in Hubei were for the loss of industrial properties, followed by cars and agricultural products. In Anhui, most of the damage was in the agricultural sector, with few claims for property and car losses. 225 dead or missing in Hebei province floods David Alexander, the head of property and casualty reinsurance in Hong Kong and Taiwan at Swiss Re, said China was the world’s third-largest insurance market in terms of policy premiums, after the United States and Japan. However, the country is still seriously underinsured as the penetration rate, which refers to amount of premiums per person, ranked 40th worldwide. “Hong Kong rather is very high on insurance penetration rate as it is ranked third worldwide, after Taiwan and Cayman Islands,” Alexander said. However, Wong said the Chinese would continue to buy more insurance for protection and investment purposes in coming years. “The growing number of middle class and demand for investment would drive the insurance market to grow further in the next few years,” he said. Total life insurance premiums in the first five months of this year in China rose 50.43 per cent year on year, up from 21.5 per cent for the whole of last year. Wong said the strong growth was due to the increase in maximum guaranteed returns to about 4 per cent from 2.5 per cent, which encouraged consumers to shift from wealth management products to insurance policies. Rail line blocked, homes collapse as landslides, floods hit area of central China Premiums from general policies covering property, cars and others rose 9.4 per cent in the first five months, after surging 18.3 per cent for the whole of last year. Wong said the slowdown was a result of the economic downturn. Alexander said there had been a trend for mainlanders coming to Hong Kong to buy life policies. In March, about one-third of all life insurance premiums were from policies bought by mainlanders. He said the mainlanders were attracted by the city’s product choices. In addition, the policies were sold in US and Hong Kong currencies, allowing the mainlanders to hedge against risks of a yuan devaluation. The yuan fell more than 3 per cent against the US dollar this year after having slid 5 per cent last year. Earlier this year, mainland regulators tightened controls on the payment of premiums in Hong Kong. “These measures were to ensure payments were made appropriately. This would not affect mainlanders buying policies in Hong Kong to diversify their risks,” Alexander said.