Typhoon insurance market in china report by daxue consulting

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The typhoon insurance market in China
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2
Typhoon insurance in China:
overview
1.
Typhoons caused great losses from
various industries
2.
03
09
13
Dynamics & main players in China’s
agriculture insurance market
3.
CONTENT OUTLINE
18
Dynamics & main players in China’s
hospitality-related insurance market
4.

3
ALL RIGHTS RESERVED
Typhoon insurance in China:
overview
1

ALL RIGHTS RESERVED
China’s system of compensation for natural disasters relies heavily on government relief and public donations while insurance
has historically played a rather weak role.
The 2008 Wenchuan earthquake has prompted the Chinese government to develop its’ natural disaster insurance system.
Limited pilot programs have been launched, but most rural areas and central and western provinces still have no coverage,
relying instead on agricultural and property insurance.
The government is the main compensator for natural disasters
4
2008
2010
2016
2013
2014
The CIRC suggests a
framework for China’s
natural disaster
insurance system.
This includes plans for
natural catastrophes and
agricultural disasters.
The CIRC conducts
catastrophes insurance
studies and submit them to
the State Council.
The CIRC publishes a
report on earthquake
insurance.
Pilot programs are
launched in Sichuan and
Yunnan.
The State Council requests the incorporation of
insurance into China’s natural disaster prevention
and relief program.
Pilot programs are launched in Ningbo, Yunnan,
Shenzhen and Sichuan.
Guangdong launches a pilot
catastrophe index insurance
policy covering typhoons,
rainstorms and earthquakes.
Source: World Bank designed by Daxue consulting

ALL RIGHTS RESERVED
China’s typhoons seasonality
Being on the coast of the Pacific Ocean, China experiences some of the biggest typhoons in the world. Each year, they
cause substantial damage through strong winds, floods and landslides.
The first typhoon usually lands in China in late June, the first batch usually dealing a limited amount of damage.
According to China Meteorological Administration’s data, typhoon season in China is from July to September.
5
Source: Weather China designed by Daxue consulting
130 typhoons made landfall in July and August
122 typhoons made landfall in September
7 8
9
Source: China Meteorological Administration designed by Daxue consulting
4
26
30
8
2
August
July
June
May
April
Numbers of typhoons making first landfall in China by months
(1949-2018)
Most typhoons made first landfall in June.
78%
From July to
September
22%
In other months
Typhoon-prone periods for typhoons’ landing in China
(1949-2019)

6
ALL RIGHTS RESERVED
China is mainly affected by severe tropical storms and typhoons
Based on maximum surface wind speed near the center of tropical cyclones, China Meteorological Administration divides tropical
cyclones (TCs) into six categories – tropical depression, tropical storms, severe tropical storms, typhoons, severe typhoons and
super typhoons. In China, TC equivalent to or above the level of tropical storm is called "typhoon".
6
Source: China Typhoon Online designed by Daxue consulting
1.80%
6.60%
33.70%
32.20%
15.60% Tropical storm
Severe tropical
storm
Typhoon
Severe typhoon
Super typhoon
Proportion of typhoons by
categories that landed in China
(1949-2018)
Classification of tropical cyclones landing in China
Name Quality
Tropical
depression
Maximum average wind speed near the center
of surface: 10.8-17.1 meter/second, level: 6-7
Tropical
storm
Severe
tropical
storm
Typhoon Maximum average wind speed near the center
Severe
typhoon
Super
Typhoon
of surface≥51 meter/second, level: 16 and
above
2016-09
Fujian Province
Super typhoon: Meranti
Level 18*
2017-08
Guangdong Province
Severe typhoon: Hato
Level 14*
2018-09
Guangdong Province
Typhoon: Mangkhut
Level 10*
2020-08
Liaoning Province
Severe tropical Storm: Bavi
Level 10*
*The typhoon levels here refer to the wind speed passing through
the provinces, not the average speed of the typhoons.

7
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Typhoons mostly hit the southern coastal provinces of China
According to data spanning the last 70 years, most severe typhoons make landfall in China in southeastern provinces.
The largest number of typhoons made landfall in Guangdong, but Taiwan was the most hit by severe or super typhoons.
7
Southern coastal provinces
were hit by typhoons to
varying degrees
Guangdong and Hainan are
TOP 2 provinces most
susceptible to landings of
all kinds of tropical
cyclones.
But it is Taiwan that has
suffered the most from
dangerous typhoons.
In addition to typhoons that
land directly in China,
typhoons that land in the
surrounding area and then
move to China have also
had a huge impact on
China.
Typhoons’ places of landing in China
(1949-2018)
Landing of all tropical cyclones
The southeastern coastal
provinces are the most severely
and frequently hit by typhoons
North
Pacific
Ocean
South China Sea
South
Korea
Taiwan
Guangxi
Hainan
Liaoning
Tianjin
Shandong
Jiangsu
Zhejiang
Fujian
Hong Kong
Guangdong
Shanghai
1
4
5
6
11
29
Guangxi
Fujian
Hainan
Zhejiang
Guangdong
Taiwan
Number of landfall of severe or super
typhoons across provinces of China
(1949-2018)

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100 122 105 110 109 117 113
Increasing number of severe and super typhoons making landfall in China
8
35
23
21
21 18 18
12
17
24
20
17
22
26
37
25
34
42
37
25 21
31
50
26
23
26
34
22
0 0
2 5
6
14
15
0 0
2
2
0 0
6
1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 2000-2009 2010-2019
Total number of tropical cyclones making landfall in China *
(1950-2019)
Tropical depression Tropical storm Severe tropical storm Typhoon Severe typhoon Super typhoon
Source: TCDATA designed by Daxue consulting
There were no big fluctuations in the total number of tropical cyclones over the years, but the number of severe and super
typhoons has been rising.
Total Total Total Total Total Total Total
*The statistics here are partially
overlapping, because the same tropical
cyclone had different speeds when it made
landfall in different provinces and cities,
and they are all recorded in the calculation.

9
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2 Typhoons caused great economic
& population losses

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122.9 106.8 66.1 31.4 29.3
27.6
4.4
1.7 1.3 2.7
60.9
42.2
10.4
3.5 4
1.1
25.5
1.7
17.7 17
22
288
8.9
1.2 1.8
113
5.9
43.4
7.7
3.8
Zhejiang Guangdong Fujian Hainan Guangxi
Top 5 provinces with highest direct economic losses caused by typhoons in China
(billion yuan, 2012-2016)
2012 2013 2014 2015 2016
Zhejiang suffered the largest economic losses caused by typhoons
10
These five provinces encountered typhoons every year from 2012 to 2016.
Based on these figures, although there were less tropical cyclones making landfalls in Zhejiang than in Guangdong, economic
losses were still more severe in Zhejiang.
Typhoon Meranti made
landfall in Fujian.
Great losses due to 3
typhoons’ back-and-forth hits.
Total Total Total Total Total
0
1
0
5
3
2
Typhoon
Sever
typhoon
Super
typhoon
Guangdong
Zhejiang
Number of tropical cyclones making
landfalls in Guangdong & Zhejiang
(2012-2016)
Source: Hainan Meteorological Service designed by Daxue consulting

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The number of affected people in rural areas was higher than in cities
11
Despite the development of infrastructure and medical care, as can be seen from the following chart, the number of people
killed by typhoons has not decreased.
According to the data from Hainan Meteorological Service, if a typhoon makes landfall in a rural area, it will cause more deaths
due to the weaker infrastructure and lower preventive awareness compared to urban areas.
Although typhoons that made landfall in Guangdong in 2013 affected more population compared than those in 2010, but more deaths occurred in 2010. One of the
reasons is that in 2010 the typhoon made landfall in Wuyang Town, Guangdong Province, which is a small costal town. While the one in 2013 made landfall in an
urban area, Shanwei City. Compared to rural areas, urban buildings have a more solid typhoon-resistant infrastructure, as well as better typhoon-proofing practices.
Provinces 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
Affected
population by
typhoons
(million people,
2007-2016)
Zhejiang 2.5 6.7 1.6 12.3 8.9 1 0.04 7.7 4 17.9
Guangdong 3 6.1 5.5 21.5 3.1 2.6 6.4 3.8 13.7 1.2
Guangxi 6 2.8 7.7 4.5 4 4.1 2.2 7.3 8.7 2.2
Fujian 4.7 2.7 0.7 3.1 1.2 1.3 1.9 2.1 1.9 3.1
Hainan 4.6 1.1 6.1 3.5 1.5 4.8 0.9 2.8 2.7 2.8
Deaths caused
by typhoons
(number of
people,
2007-2016)
Zhejiang 40 15 9 5 25
Guangdong 18 90 11 134 20 54 6
Guangxi 2 1 15 31 4 8 13 5
Fujian 126 8 5 16 4 4 1 23
Hainan 5 1 27 27 1 3 2 10
Source: Hainan Meteorological Service designed by Daxue consulting

12
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Over hundreds of billions yuan and thousands of hectares lost
Typhoons always bring destruction of all kinds, such as economic losses and missing people, and are characterized by their
suddenness and destructive power.
12
• Tropical Depression • Tropical Storm • Severe tropical storm • Typhoon • Severe Typhoon • Super Typhoon
Lekima
Zhejiang
Shanghai
Jiangsu
Shandong
2019.8 Lekima
Damaged over one million hectares of crops
Level: 17+
Impacted range: Zhejiang, Fujian, Jiangsu,
Shanghai, Anhui, Shandong, Henan, Hebei,
Tianjin, Liaoning, Jilin
Dead/missing: 57/14 people
Direct economy loss: 515.3 billion yuan
Crop damage area: 1,137 thousand hectares
2014.7 Rammasun
The strongest typhoon since 1949. It passed
through 59 counties and urban areas
Rammasun
Hainan
Yunnan
Guangxi
Guangdong
Level: 17+
Impacted range: Guangdong, Guangxi,
Hainan, Yunnan
Crop damage area: 468.5 thousand hectares
2016.7 Nepartak
The tropical storm led to 83 people dead in
Fujian
Level: 17+
Impacted range: Taiwan, Fujian, Jiangxi
Crop damage area: 16.2 thousand hectares
Nepartak
Fujian
Jiangxi
Taiwan

13
ALL RIGHTS RESERVED
3 Dynamics & main players in China’s
agriculture insurance market

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Although damages vary depending on the year, about 1 million hectares of crops were destroyed yearly by natural disasters in
China, typhoons being the first cause of damages.
The most impacted province is by far Heilongjiang where about 50% of crops destroyed in 2019 by floods and typhoons were
located. The other provinces the most impacted by Typhoons in 2018 and 2019 were Shandong, Jiangxi and Henan.
Heilongjiang's crops are severely affected by natural disasters every year
Source: Weather China designed by Daxue consulting
7341.3
10554.9
5808.8
7283.1
8604.8
841
1442.4
766.1 1009.9
1480.8
2015 2016 2017 2018 2019
Impacted area of natural disasters on agriculture
(thousand hectares)
Areas affected by floods, geological disasters and typhoons
Areas destroyed by floods, geological disasters and typhoons
Heilongjiang shows the worst numbers for floods
and typhoons damages, but they are not on the list
of the hardest hit provinces from other sources.
38.1%
11%
7.8%
Heilongjiang Shandong Jiangxi Others
48.9%
10.8%
8.3%
15%
11.7%
11.4%
Heilongjiang Shandong
Henan Others
22.5%
8.4%
5.6%
2018
Affected area
Destroyed area
Percentage of top 3 provinces’ crop areas
damaged by natural disasters
(thousand hectares)
2019
Affected area
Destroyed area

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China’s agricultural insurance system is still relatively young and relies very heavily on premium subsidies from the government.
Since 2010, the sum insured by China’s agricultural insurance has almost decupled and premium revenues more than
quadrupled thanks to efforts from the government to expand the system.
The Chinese agricultural insurance industry is young and booming
Year
Sum
insured
(billion
yuan)
Premium
revenues
(billion
yuan)
Crops
insured
(million
hectares)
Forest
insured
(million
hectares)
Livestock
insured
(billion
heads)
2010 382.8 13 45.4 32.1 3.7
2011 633.5 16.9 53.8 96.1 4
2012 886.8 23.3 64.9 75.1 4.7
2013 1,347.4 29.8 74.1 127.2 6.8
2014 1,585.7 31.7 78.7 187.4 8.7
2015 1,908.4 36.3 96.8 194.2 9.7
2016 2,098.8 40.8 115.3 151.2 12.8
2017 2,711 46.6 140.4 169.6 17.3
2018 3,362 55.7 166.2 173.8 21.5
Source: World Bank deisgned by Daxue consulting
2007
The first pilot program for agricultural insurance in
launched with increased premium subsidies in a select few
provinces.
2012
The State Council issued the first law regulating agricultural
insurance in China.
2016
The ministry of finance issued the administrative measures
for agricultural insurance premium subsidy from the central
government.
2019
The Central Committee set a priority on developing a
diversified agricultural insurance system with an emphasis
on a multi-layer catastrophic risk spreading system.

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PICC, 54%
China United,
16%
Sunlight, 8%
Guoyuan, 6%
Anhua, 5%
Others, 11%
China’s agriculture insurance industry market shares
(2016)
Only a few companies were initially allowed to underwrite agriculture insurance policies, this number grew steadily over the
years. In 2019, there were 32 insurers underwriting agriculture insurance in China with a minimum choice of 3 in each province.
As market penetration for agricultural insurance products grew, so did payouts.
Payouts and competition have grown as the industry developed
Source: World Bank, Agroinsurance, Chinabaogao designed by Daxue consulting
21.0
23.7
29.9
33.3
39.4
52.8
7.6%
13%
26.2%
11.4%
18.3%
33.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2014 2015 2016 2017 2018 2019
Agriculture insurance indemnities in China
(billion yuan, 2014-2019)
Total indemnities Growth rate

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Main players of the agriculture insurance industry in China
17
Agriculture insurance in China heavily depends on local regulations and thus companies do not sell unified products across all
provinces.
More than two third of the agriculture market in China is owned by the three largest insurers.
Sunlight Agricultural Mutual
Insurance Company is the
third largest agricultural
insurer in China and, unlike
other large insurers, are
mainly focused on agricultural
insurance products.
They offer advanced
insurance products in all
agricultural fields, including
crop insurance based on
weather indexes for provinces
prone to typhoons.
PICC benefits from its’
position as the largest non-
life insurer in China to cover
the whole nation with a wide
network of agencies.
It offers a fast and
comprehensive claim process
for farmers, which is fairly
uncommon for agriculture
insurance in China.
China Insurance is the second
largest agricultural insurer in
China.
Like PICC, it benefits from a
wide coverage and offers a
large variety of insurance
plans covering all sorts of
plantation and livestock.

18
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4 Dynamics & main players in China’s
hospitality-related insurance market

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The hospitality industry is covered by several types of insurance
19
Because of the lack of dedicated insurance for natural disasters, businesses in China rely on several different types of insurance
to cover damages caused by typhoons.
Catastrophe insurance
Custom made insurance plans covering natural disaster
do exist in China, but the industry is still at its’ early
stage of development.
These comprehensive policies span across several
fields of insurance, covering from enterprise assets to
profit loss and cargo transportation.
Corporate property insurance
Commercial properties such as shops, hotels and
warehouses can be insured with a corporate property
insurance.
However, clauses insuring against natural disasters are
often optional and come at a steep cost with relatively
low indemnities.
Natural disaster insurance products have thus a low
penetration rate in China.
Public liability insurance
A few Chinese provinces and municipalities have
financed a local natural disaster public liability insurance
system, although these are rare.
The local government subscribes to an insurance that
allows residents to ask for indemnities in case of loss
caused by natural disasters.
Corporate liability insurance
Corporate liability insurance covers employees and other
third parties from accidents happening on company
property.
Although some exceptional circumstances are not
covered, injuries caused by natural disasters on the
workplace can be subject to indemnities.
Third party liability insurance is mandatory in China, but
not employer liability.

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Corporate liability insurance in China is still underdeveloped
20
Employer liability is one of the least profitable insurance products in China due to the high-risk potential of insured parties
which are usually companies undertaking high-risk manufacturing industries.
Mandatory social insurance in China covers employment injuries but coverage is limited and varies depending on local
government regulations.
General liability
32%
Financial line
9%
Product liability
11%
Employer liability
27%
Other liability
21%
Liability premiums by line of business in China
(2018)
Social insurance Employer rate Employee rate
Pension insurance 20% 8%
Maternity insurance 1% N/A
Employment injury insurance 0.2% N/A
Unemployment insurance 0.5% 0.5%
Medical insurance 9.5% 2%
Housing 7% 2%
Source: Swiss Re and HROne designed by Daxue consulting
Contribution rates to social insurance in Shanghai
(% of gross salary)

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Main players in the Chinese liability insurance industry
21
Similarly to agricultural insurance, the liability sector in China is controlled by a small oligopoly of large insurers.
While PICC dominates, other insurers have been able to secure market share with different pricing policies and innovative
insurance products.
China Pacific is specialized in
personal insurance but still
offers niche corporate liability
insurance products.
Notably, they answered the
spread of remote work in
China with an affordable
employer liability plans for
remote workers.
Largest non-life insurer in
China by far, PICC offers a
large panel of corporate
insurance plans.
The company specialized in
offering all inclusive plans
covering both property
damages and employer
liability.
They advertise a fast and
comprehensive claim system.
Slightly cheaper than the
competition, Ping An offers
flexible corporate insurance
plans.
Indemnities for workplace
accidents go from 5,000 to
100,000 RMB per employee.

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Market penetration for this kind of insurance policy is still relatively low due to high costs and low indemnities for policy
holders.
Consequently, in China many consider this kind of insurance not worth the money, making corporate property insurance one of
the slowest growing insurance sectors in China.
Market penetration for property insurance is low in China
Source: Chinese National Bureau of Statistics designed by Daxue consulting
37.88 38.74 38.62 38.12 39.2
42.33
46.41
5.10%
2.27%
-0.31%
-1.30%
2.83%
7.98%
9.63%
-5.00%
-3.00%
-1.00%
1.00%
3.00%
5.00%
7.00%
9.00%
11.00%
0
5
10
15
20
25
30
35
40
45
50
2013 2014 2015 2016 2017 2018 2019
Corporate property insurance premium revenues in China (2013–2019)
Premium revenues (billion RMB) YoY growth

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Insurance type
Premium
revenues
Net claims
Underwriting
profits
Motor 265.7 147.6 8.8
Health 66.2 50.7 -0.8
Agriculture 35.8 19.4 0
Liability 28.5 11 0.5
Corporate
property
14.3 5.47 -0.3
Other P&C 12.6 4 0.6
Credit 5.3 15 -5.1
Cargo 3.8 1.2 0.4
Total 432.2 254.4 4.1
Like in the agriculture insurance sector, only a handful of large insurers detain most of the property insurance industry.
Corporate property insurance in China only represents 4% of the P&C market in premium revenues.
There is room for improvement in the corporate property insurance sector
PICC
33%
Ping An
21%
CPIC
10%
China Life
6%
CCIC
4%
Others
26%
China’s property insurance market shares
(2018)
Source: Huibiao World, PICC annual report 2020, Qianzhan designed by Daxue consulting
PICC 2020 annual report summary
(billion yuan)

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Main players in the Chinese property insurance industry
24
Among all insurance types, natural disasters are more commonly covered in property insurance.
Leading property insurance players such as PICC and Ping An usually provide comprehensive protection.
This insurance package covers a
wide-range of insurance types.
Specifically, enterprise property
insurance and cash insurance
are provided to cover the direct
economic losses caused by
natural disasters.
This insurance package covers a
wide-range of insurance types.
Specifically, enterprise property
insurance and cash insurance
are provided to cover the direct
economic losses caused by
natural disasters.
This product delivers a
personalized insurance plan
with multiple choices
available.
More products are available
such as engineering and cargo
insurance to react to natural
disasters in a more exhaustive
manner.
Insurance package for small
enterprises
Insurance package for small
enterprises
Customized Insurance
package for SMEs

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Insurance broker in China
• Entrepreneurship is associated with risks, let’s turn risks into gains
26
Asian Risks Management Services Limited (ARMS) advises
corporates on insurable risks in China, individuals on medical
insurance and home insurance.
With a presence in Beijing and Shanghai, we provide services
all over China.
INDEPENDENT from any insurance providers, ARMS combines
international and local expertise in the insurance industry
with more than 15 years of presence in the Chinese insurance
market, we act to the BEST INTERESTS of our clients.
Life Insurance
人寿保险
Employee Benefits
员工福利
General Insurance
综合保险
Medical Insurance
医疗保险

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Have access now to our risk mitigation solutions in China
• Asian Risks Management Services offers tailor-made and innovative insurance solutions for corporates and individuals
27
CONTACT US
010-6500 3217
www.asian-risks.com
info@asian-risks.com
Etc…
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Typhoon insurance market in china report by daxue consulting