Little quake impact for China's insurers

Posted by: Bruce Einhorn on May 21, 2008

With Sichuan still staggering from the earthquake and China in a three-day period of mourning, people of course are focusing on the human side of the disaster. That said, business does go on, and investors in Shanghai and Hong Kong have hammered stocks like Dongfang Electric that have suffered serious blows to their operations.

Typically, natural disasters hurt the insurance companies, since insurers have to pay out big sums to policyholders. Standard & Poor’s (like BusinessWeek, part of the McGraw-Hill family) has just come out with a report saying that China’s insurers such as Ping An and China Life will indeed feel some impact. “The 2008 earnings of the listed insurers in China could be significantly impacted by the combined result of earthquake and recent snowstorms claims, as well as investment market volatility,” says S&P analyst Connie Wong in the press release. However, she adds that S&P isn’t expecting insurers to pay out much for property loss, since so few people in China have property insurance with earthquake coverage. So, along with stronger enforcement of building codes, here’s another change that may come from China’s disaster. Writes Wong: “As a consequence of recent catastrophic events in China, the demand for insurance coverage against natural catastrophes is likely to increase over time.”