Aon Benfield Greater

Natural Catastrophe Report for China in Summer 2016

October 2016

Risk. Reinsurance. Human Resources. Summer 2016 witnessed one of the worst flooding and typhoon seasons in China since 1998. Much of China endured substantial seasonal “Mei-Yu” rainfall from April that caused severe flooding, affecting nearly 20 provincial regions. This report is prepared by the Aon Benfield China Analytics team to help understand the cause(s) of the hazards, severity impact and loss estimation. This report focuses on the two major floods during summer 2016. A detailed comparison to the 1998 flooding event is provided, including rainfall statistics, impacted areas, and loss estimation. Other major hazards in 2016, including Super , are also covered by this report. Finally, on behalf of the Aon Benfield China team, a special Thank You to all parties including government agencies, media and insurance industry bodies who provided great assistance during the data collection and investigation process, and to the kind assistance of our Aon Benfield global analytics team.

Qin Lu CEO, Aon Benfield Greater China and CEO, Aon Risk Solutions China Executive Summary

China has seen a series of natural disasters in 2016 including floods, typhoons, and earthquakes. Direct economic loss has reached at least CNY330b, and over 3.3million hectares of crops were deemed total loss. Among all events, the two floods have been the most significant in terms of direct economic losses so far. This report illustrates causes and impacts of the floods this summer (from June to August). By the end of August, 20 provinces had been severely affected, concentrated in areas along the River as well as in north and northeastern part of China. Aon Benfield estimates the insured loss to exceed CNY4b. El Niño events are observed to impact China mostly in the year after its peak. Both 1998 and 2016 have experienced severe flood, being the year after a super El Niño, and having comparable climate patterns. This report compares the flood events in these two years, so as to provide reference for evaluation of major floods events in the future. , Nida and Dianmu made landfalls during July and August, resulting in CNY11b economic losses in total. Furthermore, large-scale in the northern part of China caused CNY37.8b economic losses from June through to August. Loss Recap

Since late June 2016, China has suffered severe losses from natural disasters. According to China’s Ministry of Civil Affairs, during June to August, natural disasters caused over CNY330b of direct economic losses, crop loss in an area of over 3.3 million hectares, and the collapse of 440,000 houses.

The two floods accounted for the most severe loss during June to August - the Yangtze River flood and the north-northeastern China flood. Meanwhile, several other perils, specifically typhoons, droughts, and earthquakes have occurred nationwide.

Direct Economic Losses from Natural Disasters, 2016 June to August

Others Typhoon 7% 5%

Drought 11%

Flood and Eological Disasters 77%

Sources: Ministry of Civil Affairs, Aon Benfield Analytics Statistics from the Ministry of Civil Affairs showed that the direct economic losses in June, July and August are CNY50b, CNY233.1b and CNY50.4b respectively. In addition, provinces located in the middle and lower reaches of Yangtze River are most severely affected. Among them, Hubei province suffered the largest economic loss, reaching CNY67.7b.

Losses for Major Affected Provinces, 2016 June to July Economic Loss Crops Total Loss Area Collapse of Houses Province (CNY Billions) (thousand hectares) (thousand) Hubei 67.7 564 60

Hebei 59.5 128 109

Anhui 39.2 301 51

Hunan 20.9 126 37

Guizhou 12.9 29 17

Henan 10.9 43 41

Fujian 10.4 7 19

Jiangxi 9.3 122 10

Shanxi 8.3 53 22

Inner Mongolia 7.6 303 -

Top ten total loss ratio 87% 84% 84%

Others 36.5 315 71

Total 283.1 1990 437

Source: Ministry of Civil Affairs Flood

2016 Yangtze River Flood

Since June 30th, due to monsoon and cold weather passing from the north, the middle and lower reaches of Yangtze River have suffered several heavy rainfalls this year. Cumulative precipitation recorded in certain areas in Hubei, , and provinces have reached as high as 300- 500mm. Areas with cumulative rainfall above 100mm spanned across an area of 240 thousand square kilometres, with above 250mm across 60 thousand square kilometres.

Flooding in the Middle and Lower Reaches of Yangtze River During July 4th to 8th

Source: Ministry of Civil Affairs, Aon Benfield Analytics

Flood and other geological hazards caused by heavy rainfalls triggered significant damage to 11 provinces including Hubei, Anhui and . According to the government statistics as of July 8th, total economic loss has reached CNY67.1b, and over 2,700 thousand hectares of crops were affected, including 674 thousand hectares of total loss. Reported loss continued to develop after July 8th and we expect the total economic loss countrywide to increase further. However, Hubei, Anhui and Hunan still suffered the heaviest losses. Flood Loss Statistics, as of 8th July 2016

Economic Loss Crops Affected Area Crops Total Loss Area Province Loss percentage (CNY Billion) (thousand hectares) (thousand hectares)

Hubei 23.6 34.9% 1213 327

Anhui 21.9 32.3% 666 213

Hunan 10.0 14.8% 383 67

Jiangsu 4.0 5.9% 252 18

Guizhou 3.8 5.6% 26 5

Jiangxi 2.2 3.2% 102 33

Henan 0.8 1.2% 10 3

Chongqing 0.7 1.0% 23 4

Yunnan 0.3 0.4% 9 1

Sichuan 0.3 0.4% 12 3

Guangxi 0.1 0.1% 3 0.4

Total 67.1 100% 2701 674

Source: Ministry of Civil Affairs 2016 July Flood in North and North-

Due to heavy rainfall in the Huanghuai area and north-northeastern China during July 18th to 21th, 10 provinces including Hebei, Henan and Shanxi were affected by rainfall induced flooding, with Hebei suffering the heaviest. According to government statistics as of July 25th, total economic loss has reached CNY31.1b. Reported loss continued to develop after July 25th and we expect the total economic loss countrywide to increase further. However, Hebei still suffered the heaviest loss.

Flood Loss Statistics, as of 25th July 2016

Economic Loss Crops Affected Area Crops Total Loss Area Province Loss percentage (CNY Billion) (thousand hectares) (thousand hectares)

Hebei 21.2 67.9% 734 32

Henan 4.8 15.4% 154 24

Shanxi 3.3 10.6% 140 13

Liaoning 0.8 2.6% 46 2

Shandong 0.5 1.6% 71 3

Beijing 0.5 1.6% 12 1

Tianjin 0.05 0.2% 12 -

Inner Mongolia 0.05 0.2% 10 1

Heilongjiang 0.003 0.01% 0.4 0.1

Jilin 0.001 0.003% 0.3 -

Total 31.1 100% 1179 76

Source: Ministry of Civil Affairs Flooding During July 21th to 22th

Sources: Ministry of Civil Affairs, Aon Benfield Analytics

Precipitation in Hebei: 18th -21th July

Source: Hebei Meteorological Centre Insured Losses

As of September 9th, 130,000 claims related to storm and flood have been reported. Based on our estimation, total insurance loss will reach over CNY4b.

In terms of the severely affected areas of Hubei, Anhui, Henan, and Hebei provinces, total insurance loss was estimated at over CNY2.49b. As of July 25th, 54.4 thousand claims related to storm and flood have been reported in Hubei, with an estimated loss amount of CNY1.43b, including 29.4 thousand motor claims with estimated loss amount of CNY397m. As of July 6th, non-life insurers in Anhui reported losses about CNY319m, including CNY212m of agricultural loss, CNY42.86m of property loss and CNY42.83m of motor loss.

Total insurance loss is estimated to be approximately 1.5% of total economic loss, reflecting a relatively low level of insurance penetration. Comparison with the 1998 China Flood

The influence of El Niño on China usually occurs in the following year. A 1-in-100 year flood event occurred in China in 1998, which is a year just after a super El Niño event. The recent flood events are compared to the 1998 event in detail below, in order to provide reference for major flood events in the future.

1998 Flood and 2016 Flood loss Comparison

1998 2016

Onset of 12 th April 21st March Flood Season More than 30 heavy rainfalls occurred A relatively stable . 74 heavy rainfall days since the flood season. Rainband swings Days of Rainfall in Yangtze River Basin from June to August. The northerly and southerly. The maximum maximum duration of heavy rainfall is 16 days. duration of heavy rainfall is 7 days. National average summer precipitation is 343.4mm, highest since 1998 and 6% higher than Yangtze River Basin average precipitation the same period in normal years. Precipitation Precipitation reached circa 740mm, which is 18.7% in areas along the Yangtze River downstream, higher than historical perennial. the western part of Northwest China and most of North China are 20% to 100% higher compared with the same period in normal years. Basin-wide flood occurred in the Yangtze River Basin. Dam broken at Jiujiang. Record- No dam broken in mainstream of Yangtze River. Disaster breaking level flood occurred in the Nen Precipitation is concentrated in middle and Distribution River and the . 1-in-100 year downstream of the Yangtze River, as well as flooding occurred in the in north and northeastern part of the country. Basin and the in Province.

Economic Loss CNY255.1b at 1998 value CNY255.8b (from June to August)

Sources: Ministry of Water Resources, China Meteorological Administration, Ministry of Civil Affairs, State Flood Control and Drought Relief Headquarters Provinces affected by the 1998 floods and in main flood season of 2016 are compared below based on provincial economic losses.

Provincial Economic Losses from Floods, in 1998 and in 2016 (CNY Billions)

Sources: Ministry of Civil Affairs, State Flood Control and Drought Relief Headquarters, Aon Benfield Analytics According to provincial economic losses in 1998 and in June - July 2016 (provincial economic losses in August 2016 was not published by Ministry of Civil Affairs), the two most affected provinces were Hunan and Jiangxi in 1998, and Hubei and Hebei in 2016. The following table shows the top ten provinces with the largest economic losses in 2016 and their corresponding economic losses in 1998.

Economic Losses from 1998 Flood, of Top Ten Affected Provinces in 2016

Economic Loss in 1998 Present Value of Economic Loss in 1998* Province (CNY Billions) (CNY Billions)

Hubei 35.7 50.0

Hebei 2.1 3.0

Anhui 13.1 18.3

Hunan 42.3 59.2

Guizhou 1.0 1.4

Henan 4.0 5.6

Gujian 8.8 12.3

Jiangxi 40.8 57.1

Shanxi 0.9 1.3

Inner 15.9 22.3 Mongolia

Others 90.5 126.6

Total 255.1 357.1

Sources: Ministry of Civil Affairs, State Flood Control and Drought Relief Headquarters *Present Value is calculated based on the change in CPI from 1998 to 2016 Since 1998, the Chinese government has increased investment in flood control. Capabilities in rainstorm and flood forecast and defence systems have improved significantly, which helps to reduce losses from flooding. The overall situation in the main flood season of this year is relatively less severe than in 1998. Comparisons are carried out in the table below, between 1998 and this summer on the following aspects - number of dead and missing, emergency relocated population, number of houses collapsed, affected crop area, present value of direct economic loss and the ratio of present value of direct economic loss to that year’s GDP.

Flood Losses in 1998 and in 2016 Summer

4,150 1998 2016

357.1

2.99% 255.8 22,290 18,390

914 6,850 7,200 5,410 0.35% 410

Number of Dead Emergency Relocated Number of Houses Affected Crop Area Present Value of The Ratio of Present and Missing Population Collapsed (Thousand Hectare) Direct Economic Loss Value of Direct (Thousand) (Thousand) (CNY Billion) Economic Loss to That Year's GDP

Sources: Ministry of Civil Affairs, Aon Benfield Analytics

*2016 GDP was based on the target GDP published in the Report of the Work of the Government Typhoon

Typhoon Nepartak, Typhoon Nida, Typhoon Dianmu – Event and Loss Comparison

Typhoon Nepartak Nida Dianmu

13:45 July 9th 3:35 August 2nd 15:40 August 18th Time and City Dapeng Peninsula, Zhenjiang City, Location of Landing Fujian Province (landing twice) Province Guangdong Province Force 14 (42 m/s, Max Speed Near the Center Force 10 (25 m/s, Storm) Force 8(20 m/s, Gale) Severe Typhoon) 94 counties in 35 cities 61 counties in 12 cities 27 counties in 10 cities, in Hunan, Guangdong, Provinces Affected in Fujian, Jiangxi, Guangdong, , Guangxi, Guizhou, Guangdong Provinces Hainan, Provinces Yunnan Provinces Direct Economic Loss 8.4 0.8 1.8 (CNY Billion) Population Affected 790 800 1,100 (Thousand) Crops Affected Area 28 39 50 (Thousand Hectares) Crops Affected Area 4 4 5 (Thousand Hectares) Source: Ministry of Civil Affairs of China

Paths of Typhoon Nepartak, Nida and Dianmu

Source: National Meteorological Centre of CMA Other Natural Catastrophe Events

Drought Monitoring Map as at August 16th Since the beginning of summer, continuous high temperatures and lack of rain has caused severe drought in the northern part of China, including the six provinces of Inner Mongolia, Jilin, Heilongjiang, Shaanxi, Gansu, Ningxia. According to government statistics as of August 18th, a population of 10 million was affected within the areas mentioned above (6 provinces, 30 cities, 125 counties), and total loss has reached CNY37.8b during this drought up to August. Up to the end of August, preliminary estimated crop insured loss is relatively significant in Inner Mongolia, Jilin and Heilongjiang. However, Source : http://www.weather.com.cn/ the drought claim amount cannot be finalized until after the crop harvest season at the end of September.

Other natural perils hitting China this summer include:

• Landslide occurred in , • Earthquake of magnitude 5.4 occurred Guangxi Province on 20th June in Guangxi province on 31st July

• caused by severe convection • Earthquake of magnitude 4.4 occurred landed in Yancheng City on 23rd June in on 11th August

• Severe landslides and mudslides occurred in • Several earthquakes hit the Western certain parts of Province on 6th July China on 12th-13th August

Since 24th July, multiple areas in and Shaanxi provinces suffered from continuous heavy rainfall, causing landslides and mudslides. According to government statistics as of July 27th, 58,000 people in Sichuan province (6 cities, 18 counties) and 50,000 people in Shaanxi province (8 cities, 23 counties) were affected. Live Update - Typhoon Meranti

The fourteenth named typhoon this year, Typhoon Meranti, landed in Xiang’an at 03:05 AM on 15th September. Meranti is the strongest worldwide this year, as well as the strongest typhoon ever to make landfall in southern Fujian since 1949. Under its influence, heavy rainstorm hit several places in Fujian and , with a direct economic loss of CNY11.71b as of 18th September.

Insurance companies in Fujian and Zhejiang took actions quickly. As at September 15th, non-life insurance companies in Xiamen received 24,483 claims with a total estimated loss of CNY537m. As at September 17th, non-life insurance companies in Zhejiang received 43,407 claims with a total reported loss of CNY306m.

Path of Typhoon Meranti

Source: National Meteorological Centre of CMA

Aon Benfield Analytics

Yifan Fu FCAS FIAA Head of Analytics, Greater China t +852 2861 6375 [email protected]

Sifang Zhang Director t +852 2861 6493 [email protected]

Rebecca Lin Director t +852 2861 6361 [email protected]

Simon Chen Associate Director t +852 2861 6418 [email protected]

Ruomei Zhang Analyst t +852 2862 4183 [email protected]

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© Aon Benfield Inc. 2016. All rights reserved. This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. This analysis is based upon information from sources we consider to be reliable, however Aon Benfield Inc. does not warrant the accuracy of the data or calculations herein. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Benfield Inc. disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Members of Aon Benfield Analytics will be pleased to consult on any specific situations and to provide further information regarding the matters. About Aon Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.

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