Insured losses will be minimal following Nepal earthquake
Rating agency AM Best has released a new briefing which looks at the impact on the insurance industry, following the earthquake that struck Nepal on April 25, 2015.
Despite significant economic and human losses, insured costs are expected to stay at a minimal fraction of total economic losses due to low insurance penetration in the area.
According to the briefing titled, Nepal Earthquake’s Impact to Be Minimal on Global Reinsurers, But Substantial for Local Sector, this event is not expected to have a big impact on the current reinsurance market. However, on a local level, the event is expected to have an adverse impact on local or some regional players, due to the significant cost from property and motor losses.
On May 6, 2015, AM Best commented that the ratings of General Insurance Corporation of India and Royal Insurance Corporation of Bhutan remain unchanged. Their net losses after reinsurance recovery are expected to be small relative to their capital and surplus, although their operating results will be adversely influenced.
Nepal has a small insurance market with total non-life premiums of about $102 million in 2013, and non-life insurance penetration as a percentage of gross domestic product is below 0.5 percent. Most of the claims loss is expected to come from the capital city of Kathmandu.
Nepal’s life sector is also expected to be affected by this event given the rising death tolls to over 7,500, as of May 6, 2015. Nepal’s life premiums amounted $175 million, accounting for about 63 percent of total insurance market share in 2013.