Typhoon Yagi triggers reinsurance reassessment in Vietnam

Business interruption claims are expected to be manageable.

Domestic and international reinsurers will bear most of the losses from Typhoon Yagi’s impact on Vietnam’s insurance industry, expects AM Best. 

The typhoon, which struck northern Vietnam on 7 September, is likely to affect reinsurance renewals in the region, as reinsurers reassess their appetite for catastrophe risks, indicated AM Best’s “Typhoon Yagi Likely an Earnings Event for Vietnam’s Non-Life Insurers.”

Chris Lim, associate director at AM Best, noted that whilst rated insurers have managed their geographic risk accumulations well and maintained profitability, more stringent reinsurance terms could lead to higher net retained losses for insurers moving forward. 

This could potentially impact underwriting performance more than in previous events.

Typhoon Yagi caused significant damage in northern Vietnam, particularly in Hai Phong, which hosts industrial parks with factories belonging to multinational and domestic companies. 

Coastal areas near Hanoi were also affected. Losses are expected across property, motor, and marine insurance lines, with damage reported to buildings, infrastructure, equipment, and inventory. However, given the low insurance penetration rate in Vietnam, insured losses are likely to be far lower than overall economic losses.

Business interruption claims are still being assessed, but AM Best expects the impact to be manageable, as the uptake of business interruption coverage remains limited in Vietnam.