Nepal floods drive major commercial insurance losses

Nepal's devastating floods could leave commercial insurers facing more than 20 billion Nepali rupees, or $132.3 million, in losses. Hydropower projects are expected to account for most of the claims.

The insurance cover, if paid, would compensate power-plant operators for their losses. Life insurance, personal accident and workers' compensation claims will be assessed separately as authorities verify deaths and missing people in areas that remain inaccessible.

The disaster on Nepal's border with China's Tibet region caused an estimated $2.56 billion in economic losses, according to the country's disaster authority chief. More than 1,200 people died and many others remained missing. Eleven hydropower projects are located in the affected region. Toton Chakraborty, chief executive of Oriental Insurance Company Nepal, said projects including Rasuwagadhi, Upper Trishuli-3A, Chilime and Devighat were directly affected, while assessments continued at five others.

Data from the Nepal Insurance Authority showed that the regulator had received 583 flood-related claims worth 25.87 billion Nepali rupees, or $171.13 million, by August 31. Chakraborty said the figure mainly represented insured exposure, not final claims. Detailed surveys will determine the actual losses.

Claims could increase if repairs delay the projects' commercial commissioning. Some policies compensate developers for revenue lost when operations begin later than planned. Nepal's non-life insurance market remains small, with 14 insurers generating about 5.3 billion rupees in premiums during July and August. The market is backed by Nepal Re and Himalayan Re, along with international reinsurers including India's GIC Re and Germany's Hannover Re.

Four industry executives said the floods could have lasting effects on coverage for Himalayan infrastructure. The region also faces serious earthquake and glacial-flood risks. “The recent mountain floods in South Asia may lead insurers to further review hydropower and infrastructure risks, particularly in highly exposed locations,” said Benjamin Ng, power leader for the relevant insurance sector.

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The recent mountain floods in South Asia may lead insurers to further review hydropower and infrastructure risks, particularly in highly exposed locations.