With the release of third-quarter reports by property insurers, the impact of an unusually strong El Nino on the insurance industry has become clear. In the third quarter, five listed property insurers including PICC P&C paid 14.4 billion yuan in claims due to natural disasters, and combined with second-quarter payouts, total claims reached 16.6 billion yuan.
On August 31, 2026, at PICC's 2026 interim results briefing, Zhang Daoming, president of PICC P&C, said that given expectations for a super-strong El Nino this year, catastrophe losses in 2026 are expected to exceed those in 2025. As third-quarter solvency reports from property insurers were disclosed, the powerful shockwave of El Nino was laid bare.
PICC P&C, Ping An P&C, CPIC P&C, China Life P&C, and Taiping P&C, five listed insurers, paid a combined 14.413 billion yuan in claims due to natural disasters in the third quarter (before reinsurance), with PICC P&C alone paying 7.052 billion yuan (before reinsurance). Adding the 2.176 billion yuan paid in the second quarter, the five insurers paid a total of 16.589 billion yuan (before reinsurance). Climate change is bringing more than just natural disasters; the risk maps of property insurers are being rapidly rewritten.
The five major typhoons "White Dolphin," "Bavi," "Maysak," "Sadel," and "Hongxia" disrupted the third quarter. PICC P&C paid 7.052 billion yuan before reinsurance and 5.608 billion yuan after reinsurance; Ping An P&C paid 2.985 billion yuan before reinsurance and 2.7 billion yuan after reinsurance; CPIC P&C paid 2.573 billion yuan before reinsurance and 1.924 billion yuan after reinsurance; China Life P&C paid 1.565 billion yuan before reinsurance and 1.098 billion yuan after reinsurance; and Taiping P&C paid 238 million yuan before reinsurance and 176 million yuan after reinsurance. The five property insurers paid a combined 14.413 billion yuan before reinsurance and 11.506 billion yuan after reinsurance. PICC P&C accounted for nearly half of the total claims among the five major insurers.
All of the above major claims were caused by natural disasters, especially several super typhoons this year. According to PICC P&C's third-quarter solvency report, 2026 Typhoon No. 13 "White Dolphin" alone caused 2.176 billion yuan in claims before reinsurance and 1.801 billion yuan after reinsurance. Typhoon No. 9 "Bavi" caused 1.883 billion yuan in claims before reinsurance and 1.414 billion yuan after reinsurance. Typhoon No. 10 "Maysak" caused 1.408 billion yuan before reinsurance and 1.11 billion yuan after reinsurance. Typhoon No. 18 "Sadel" caused 1.197 billion yuan before reinsurance and 986 million yuan after reinsurance. Among other insurers, Typhoon No. 13 "White Dolphin" caused the largest losses, with the five insurers paying a combined 4.445 billion yuan; Typhoon "Bavi" led to combined claims of 3.837 billion yuan; Typhoon "Maysak" led to 3.255 billion yuan; Typhoon "Sadel" led to 2.026 billion yuan; and Typhoon "Hongxia" led to 352 million yuan. (All figures above are before reinsurance.)
In the second quarter of this year, the impact of an early El Nino had already emerged. PICC P&C paid 1.357 billion yuan before reinsurance, Ping An P&C paid 385 million yuan, CPIC P&C paid 260 million yuan, China Life P&C paid 138 million yuan, and Taiping P&C paid 36 million yuan. In the third quarter, the figure surged rapidly. Combined, the five insurers paid 16.589 billion yuan before reinsurance in the second and third quarters, and 13.194 billion yuan after reinsurance.
A strong El Nino is rewriting insurers' risk maps
On August 28, at China Pacific Insurance's interim results briefing, Chen Hui, general manager of CPIC P&C, acknowledged that the biggest challenge facing property insurers is the high frequency and uncertainty of climate impacts. Then, on August 31, at PICC's interim results briefing, PICC P&C President Zhang Daoming discussed the impact of the forming strong El Nino on the company, saying that given expectations for a super-strong El Nino this year, catastrophe losses in 2026 are expected to exceed those in 2025.
Not only did the above five insurers pay huge claims due to natural disasters in the third quarter; China Continent P&C paid 314 million yuan before reinsurance in the third quarter, and China United P&C paid 227 million yuan before reinsurance. As global warming combines with a strong El Nino, extreme weather is further intensifying. The World Meteorological Organization issued a notice confirming that El Nino has formed and will continue to strengthen, and is expected to develop into a "super-strong" level, significantly affecting global precipitation and temperature patterns, with related extreme weather risks potentially lasting until February 2027. Claims from natural disasters such as heavy rain and floods are rising rapidly, and the insurance industry, standing at the forefront of risk, is facing an unprecedented test.
Reinsurers that provide risk protection for insurers are equally sensitive to this. At the August 31 interim results briefing, Wang Zhongyao, general manager of China Re P&C, also addressed the topic. Wang said the impact of this strong El Nino on global catastrophe risk is essentially a redistribution of risk, rather than a simple increase or decrease in total losses. Wang said the impact of a strong El Nino on the reinsurance industry is multidimensional and profound, with global catastrophe insurance losses in the first half of 2026 at approximately $35 billion to $47 billion. Traditional actuarial methods are built on the key assumption that "the probability of potential annual losses is roughly stable," but as extreme weather becomes more frequent, traditional actuarial models struggle to cope with the nonlinear, systemic risks brought by climate change.
How can catastrophe insurance provide a backstop?
One feature of catastrophe losses in China is that they are often concentrated in specific regions and periods, especially during the heavy rain season, in addition to risks from earthquakes, fires, explosions, and other accidents. In 2025, the direct economic losses from natural disasters nationwide were 241.617 billion yuan, of which the extremely heavy rainfall in late July in North China, Inner Mongolia, and Northeast China caused 76.83 billion yuan in losses, accounting for more than 30% of the national total. As the frequency of catastrophes increases and losses worsen, they directly hit insurers' cash flows, and how insurers diversify risk has been thrust into the spotlight.
Insurers traditionally diversify risk through reinsurance. In the third quarter, five insurers shared 2.907 billion yuan through reinsurance, reducing their own operational risk to a certain extent. However, the traditional reinsurance market has limited capacity to protect against catastrophe risk. How to obtain additional protection from the capital market, effectively supplement traditional reinsurance, smooth operational volatility, and enhance the insurance industry's resilience against catastrophe risk has become a new issue for the industry.
In 2022, PICC P&C issued a catastrophe bond in Hong Kong linked to earthquake risk, with a size of $32.5 million and a term of three years. This was the first catastrophe bond issued by a domestic direct insurer. In January 2025, Taiping Reinsurance issued Asia's first "dual-risk, dual-trigger" catastrophe bond, with a size of $35 million and a three-year term, covering both China earthquake and U.S. hurricane risk. In October 2025, the National Financial Regulatory Administration issued a notice on matters related to domestic insurers issuing insurance-linked securities in the Hong Kong market, supporting domestic insurers in issuing "sidecar" insurance-linked securities in Hong Kong. By issuing "sidecar" insurance-linked securities, insurers transfer insurance risk through proportional reinsurance to a specially established special purpose insurer (SPI). The SPI raises funds for claims by issuing equity or debt securities, deposits the funds in a trust account, and invests in low-risk, highly liquid assets to pay claims in a timely manner. The purpose is to transfer risks faced by insurers in their operations to the capital market, further expanding channels for diversifying catastrophe insurance risk and improving insurers' financial soundness.
In October this year, PICC P&C successfully issued "sidecar" insurance-linked securities in the Hong Kong market, providing reinsurance protection for PICC P&C's offshore wind power insurance business. This was the first "sidecar" insurance-linked securities issuance by a domestic insurance institution, and another practice by PICC P&C in using international capital markets to diversify insurance risk after successfully issuing a catastrophe bond in Hong Kong in 2022. From catastrophe bonds to "sidecar" insurance-linked securities, this means catastrophe risk securitization has entered a stage of development.
In addition to diversifying risk through capital instruments, the frequent occurrence of natural disasters places more demands on the role of insurers. In the future, insurers will not only play a passive role, but will increasingly need to step forward and effectively help customers manage risk and reduce losses. In this process, insurers need to transform into full-cycle, proactive risk managers. PICC said in its first-half financial report that the company established a risk map under the new El Nino cycle based on "industry + region + line of business + cause of loss," matched differentiated underwriting plans, and managed limits, deductibles, and high-risk business transformation. It uses catastrophe models to conduct precise pre-disaster inspections and risk control, and strengthens the linkage of underwriting and claims across the "pre-disaster, during-disaster, and post-disaster" stages. Ping An P&C and Ping An Technology jointly launched a full-process agricultural disaster risk control system based on spatiotemporal data prediction models, providing users with services in multiple scenarios such as disaster warnings, risk screening, and catastrophe risk management. In the first half of 2026, the project cumulatively sent more than 43.3 million effective warnings, reducing losses by more than 31.7 million yuan and serving 399,000 farming households. Ping An P&C said its self-developed "Eagle Eye System DRS 3.0" issued 6.02 billion disaster warnings for typhoons, heavy rain, floods, and other events, covering 120 million vehicle owners, enterprises, and farmers.
Comments