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A super typhoon thought to be the strongest to make landfall since records have been kept left widespread destruction in the Philippines and thousands feared dead, but insured losses are expected to be limited.
With death toll estimates far from finalized, governments from around the world last week rushed humanitarian aid to the Philippines after the hit Typhoon Haiyan, also known as Yolanda, delivered Nov. 7.
The super typhoon affected about 12 million people, according to the Philippines Disaster Management Response Program, when it made landfall. Wind speeds were as high as 195 mph, according to the Joint Typhoon Warning Center, a service run by the U.S. Navy.
But insured losses from the storm, which also affected other Asian nations, are expected to be low because of the lack of insurance penetration in the Philippines, experts say.
According to A.M. Best Co. Inc., nonlife insurance penetration in the Philippines is “significantly less than 1%” of the country's gross domestic product, which was $250.27 billion in 2012.
Jonathan Adams, a senior analyst at Bloomberg Industries, said economic losses caused by Haiyan in the Philippines may reach $14 billion.
“Although there is a probability of a high-value, single-facility insured loss, the aggregate insured loss from this event is not expected to exceed $100 million,” Oakland, Calif.-based catastrophe modeling firm Eqecat Inc. said in a statement.
U.S.-based or U.S. operations of reinsurers also are expected to have limited exposure to losses, SNL Financial L.C. said in an analysis. The top three reinsurers exposed — Ace Ltd., Allianz S.E. and Everest Re Group Ltd. — had less than $2 million each in contracts with Philippines-based insurers at the end of 2012, SNL said.
A spokesman for Swiss Re Ltd. said it was too early to estimate insured losses or the reinsurer's exposure to the typhoon.
In a recent study, Munich Reinsurance Co. said floods and typhoons are the biggest risks facing countries in eastern Asia, resulting in about $700 billion in economic losses and $76 billion in insured losses over a 30-year period.
Ludger Arnoldussen, Munich Re's board member responsible for the Asia-Pacific region, said the human tragedy of Typhoon Haiyan underscores the need for governments and insurers to work together to find ways to minimize the human and economic losses from such events.
Sources said that the fact that the storm did not severely affect major infrastructure and property, such as the Philippines' capital city of Manila, means insured losses will be fairly low.
Zurich-based investment management firm Twelve Capital A.G., which specializes in insurance-linked securities, said in a briefing note that it expects insured losses to be “very limited” given the nation's low insurance penetration and that the storm avoided major industrial areas.
“We expect agriculture and industrial property as well as marine to be the most impacted reinsurance classes,” it said, pointing out that while Typhoon Bopha, which hit the Philippines in December 2012, caused about $1 billion in economic losses, insured losses were less than $100 million.
There are no catastrophe bonds covering risks in the region, Twelve Capital said.
Bath, England-based risk analytics firm Maplecroft Ltd. said the typhoon will cause business continuity challenges for many sectors “due to the destruction of key communications and logistics infrastructure, which in turn will hamper recovery efforts in the worst-affected areas and extend repair timescales.”
According to Maplecroft, the Philippines is the world's seventh-largest producer of coconuts and its 11th-largest producer of sugar, both of which will be severely affected by the typhoon. Large-scale losses also will be suffered by the fishing industry, it said.