MILLI REASURANS ANNUAL REPORT 2018

Milli Re Annual Report 2018 Financial Status / 59 In September, Typhoon Mangkhut also known as Typhoon Ompong in the Philippines was another major event affecting the region, which brought widespread damages to Guam, the Philippines, Hong Kong and Southern China. Moreover, Mangkhut is the strongest typhoon to make landfall in the Philippines since Typhoon Haiyan in 2013 and the strongest typhoon to affect Hong Kong since Typhoon Ellen in 1983. The insured loss was small in the Philippines due to low insurance penetration but was significant in Hong Kong, which was estimated between USD 1 and 2 billion. In December, the Indonesian provinces of Lampung and Banten experienced a deadly Tsunami that was likely caused by undersea landslides in the Sunda Strait following an eruption by the Anak Krakatoa volcano. It led to widespread destructions to homes, buildings and infrastructure. The death toll is expected to exceed 430. The market insured loss is estimated at USD 1.1 billion. A few months earlier, a magnitude 7.5 earthquake struck Indonesia’s Central Sulawesi province in September triggering a tsunami and landslides causing devastation of structures and more than 2,000 deaths. There is little information on the insured damages due to the remoteness of the region and low insurance penetration. During the course of the year, the region saw a spate of closures of some reinsurers and ceasing of certain lines of business, particularly of Lloyd’s syndicates. This immediately led to premium rate increases in the engineering class and to a lesser extent, marine hull. It has been a smooth renewal season for Asia in general. Ongoing price competition was prominent. Risk-adjusted price decreases stood between 2.5% and 10% in respect of loss free programmes. During 2019 renewals in China, reinsurance buyers managed to secure higher commissions in respect of proportional treaties and were more selective regarding financial security of their reinsurance panel on the back of more stringent measures by the regulatory authorities. On the other hand, because of the country’s geographic vulnerability to natural disasters, aiming at profitability, reinsurers opted for reducing their participation on the lower end of catastrophe programmes. Korean market remained attractive in 2018 with abundant capacity available, paving the way for a smooth renewal for cedants and putting pressure on rates. Middle East The recession in Middle East countries, the contraction in liquidity and the decrease in the public spending also affected the insurance market. During 2019 renewals, it was observed that the terms and conditions in the proportional agreements were renewed mostly as expiry due to the absence of major risk losses in the region. Mekunu Cyclone which hit Oman and Yemen in 2018, being the largest storm occurred in GCC since 1958 particularly affected Dhofar region. The cyclone seriously damaged Salalah Port, Oman Petrochemicals and region’s infrastructure. While the economic loss has reached USD 400 million, the insured loss is expected to be roughly USD 280 million. On the other hand, heavy rains in November 2018 affecting Jordan, Kuwait and Saudi Arabia triggered flash floods and the related economic loss reached USD 320 million. There has not been any shrinking in reinsurance capacity, though on the contrary there is interest to the region from Portuguese and Brazilian Reinsurance companies. Meanwhile, government spending is expected to increase in the region as oil prices have reached their highest level since 2014. After ADNOC’s discovery of a huge natural gas reserve, UAE’s supreme petroleum council has given green light to ADNOC to spent USD 136 billion in the investment to increase its production capacity. This situation will turn UAE from a natural gas importer to an exporter. Additionally, as a result of the governments’ spending on infrastructure due to Abu Dhabi’s recently announced economic development plan, Expo 2020 in Dubai and World Cup 2022 in Doha; the insurance industry is expected to benefit from these developments. In line with the decision of Chinese government to increase the economic cooperation with Egypt, Chinese companies are expected to invest USD 18 billion including infrastructure construction and energy projects in 2019. 27 In 2018, losses emanating from natural disasters showed a substantial increase in comparison to the last year’s loss record. The West Pacific basin saw 27 named storms, of which 14 were typhoons and 7 were super typhoons.