July’s Typhoon Matmo was the 10th named typhoon of 2014 and the 5th to make landfall in the West Pacific basin. Typhoons can occur throughout the year, but the peak of the season is July through October, when nearly 70 percent of all typhoons develop, so we expect to see more activity in the region in the coming months.
Let’s take a look at recent activity and typhoon risk in China, the Philippines, Japan, and Taiwan.
To date, China has been impacted by three landfalling typhoons in 2014, the strongest of which was Rammasun, a Category 4 strength storm, with maximum sustained winds of 135 mph impacting Hainan and Guangdong provinces, and the autonomous region of Guangxi.
The southeastern coastal provinces of Guangdong, Fujian, and Zhejiang are most vulnerable to landfalling typhoons. They also represent some of China‘s most economically developed areas. Typhoon Rammasun impacted Guangdong province in July, bringing damaging wind and heavy rain. Overall in China, typhoon-induced flooding is the biggest driver of risk in high-exposure areas such as Guangdong, driving approximately 80 percent of the average annual losses from typhoon.
Insurance penetration is extremely low in China, varying by province. On average, about 15 percent of residential property risk is insured. Hainan, where Typhoon Rammasun first made landfall, has one of the lowest insurance penetrations in China, while Guangdong, one of the more prosperous provinces, is the second largest province for property insurance purchases with 41.7 billion Yuan ($6.8 billion) in direct premiums in 2012, according to the China Insurance Regulatory Commission.
Typhoon activity kicked off early this year in the Philippines with Tropical Storm Kajiki in January. More recently, the second storm to make landfall was Typhoon Rammasun, which hit Legaspi City in the Albay Province, south of the capital Manila, as a Category 3 storm. In a 36-hour period it brought 11.6 inches of rainfall, leading to flash flooding and landslides. The provinces impacted by Rammasun contain over $180 billion of insurable commercial and industrial building exposure, and over $215 billion of residential building exposure.
Like China, the Philippines lags behind some other markets in Asia in relation to insurance expenditure – non-life insurance penetration is 0.09 percent – though with higher proportionally for commercial and industrial businesses, which are centred around Manila and the industrial zones.
Tropical Storm Neoguri made landfall over the Kumamoto Prefecture on Kyushu Island in southwest Japan as the country’s first landfall this season. Neoguri brought strong winds, heavy rains, flooding, landslides, and mudslides to parts of southwest Japan. On Kyushu, the city of Ebino reported 13 inches of rain in the first 24 hours, and on Okinawa, heavy rainfall triggered flash flooding.
The southwestern parts of the country are the most vulnerable, particularly Shikoku, Kyushu, and San-in. Tokyo is rarely hit by typhoons and much of the coastline is protected from by the tsunami walls designed to protect from a four-meter storm surge.
Japan is the second largest non-life market in gross premium terms behind the U.S., and there is relatively high penetration of personal lines insurance, with over 50 percent of households buying building insurance. However, corporate Japan is massively under-insured compared to its western equivalents. Many large corporations only insure their property on an indemnity basis, while many small to medium-sized enterprises are completely uninsured.
So far this season, Taiwan has only been impacted by Typhoon Matmo, which passed through the center of the country as a Category 2 storm, bringing heavy rain and strong winds.
Storms typically travel towards the northwest from the Philippines, losing speed when they encounter the mountain chain running north-south down the center of Taiwan, and dropping most of their rain on the eastern side, causing rivers to overflow due to the extra water runoff from the mountains.
The most dangerous typhoons are those that approach from the south. The north-south mountain chain funnels them north up the Taiwan Straits so that they hit the western and northwestern parts of the island, including Taipei, where large industrial and commercial exposure is situated, such as the Hsin Chu Industrial Park in the province of Hsinchu which reportedly has a combined property/business interruption accumulation of $33.33 billion. However, insurers have reported few insured losses arising from wind damage alone, as the main damages are a result of flooding. Most of the losses caused by typhoons in Taiwan are agricultural, and thus uninsured. Insurance penetration is very low compared to some other markets in South East Asia in relation to insurance expenditure, with insurance penetration for non-life at 0.08 percent.