Aon Benfield Greater China 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 Typhoon Meranti, 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, droughts 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 Yangtze 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. Typhoon Nepartak, Nida and Dianmu made landfalls during July and August, resulting in CNY11b economic losses in total. Furthermore, large-scale drought 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, Anhui, and Jiangsu 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 Hunan. 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-East China 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 rainband. 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 Songhua River. 1-in-100 year downstream of the Yangtze River, as well as flooding occurred in the Xi River in Pearl River north and northeastern part of the country. Basin and the Min River in Fujian 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.