Henan floods to trigger record insurance claims of US$1.7 billion as thousands of cars, property damaged

floods, Ping An Insurance

The Henan floods are likely to see total insurance claims of as much as 11 billion yuan (US$1.7 billion), Goldman Sachs said, with one expert saying this could possibly be the largest natural catastrophe for insurers in China’s history.

The floods in the central Chinese province of Henan, caused by unprecedented rainfall last week, have killed 58 people with five still missing, while thousands of cars and homes have been damaged and farmland inundated. In the provincial capital Zhengzhou, almost 400,000 people were displaced and the direct economic losses for the city stood at 65.5 billion yuan, authorities said.

A large portion of the claims could come from Zhengzhou, where a lot of property and cars have been damaged, Goldman Sachs said in a report.

“The Henan flooding may well trigger the largest insurance payment in a single natural catastrophe in China as Zhengzhou is a major city,” said Louis Tse Ming-kwong, managing director of Wealthy Securities.

The prevalence of insurance cover, which is much higher now than in the past, will be a major factor in deciding the payout, he added.

Two major insurers saw their share prices plunge after they disclosed their exposure on Monday.

The People’s Insurance Co (Group) of China (PICC) estimated the compensation to its clients will reach 2 billion yuan, according to a statement on its website. The insurer set up in 1949, which owns the largest property and casualty insurance company in the country, said that it had already received more than 200,000 claims related to the flood damages in Henan as of 5pm on Sunday.

PICC’s share price closed 2.4 per cent lower on Monday at HK$2.46, its lowest in four months. The Beijing-based insurance holding company owns PICC Property and Casualty, which is the largest player in the car, property and casualty segment in China, with about a third of market share.

Ping An Insurance, the country’s largest insurance group and the second largest property and casualty insurer, saw its share price fall 5 per cent to HK$67.70, its lowest level since January 2019, amid market fears about its huge payout.

floods, Ping An Insurance

Floods destroyed an underground supermarket in Zhengzhou, the capital of China’s Henan province last week. Photo: Kyodo

Ping An said it would need to pay about 1 billion yuan of compensation related to the catastrophe, according a statement posted on its website. It said that it had received over 46,000 claims related to the Henan flood damages, with 97 per cent related to cars and rest for damages to property, farms and accidents. Ping An’s life insurance arm also received 39 death related claims.

Several other insurers have received insurance claims numbering in the thousands.

Both PICC and Ping An said they have speeded up the process to handle claims to help the victims to cope with the crisis.

“The insurance stocks are set to face further pressure as claims mount,” Tse said.

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