Source: Beijing Business Today
As the "strongest El Niño" shifts from prediction to fact, the insurance industry faces another major exam. On 10 12, Beijing Business Today learned from the National Climate Center that a super El Niño event officially formed in 9 this year. This event will be the strongest El Niño recorded since systematic monitoring began.
From an industry perspective, a super El Niño event serves as both a stress test for the claims cycle and a strategic window for insurers to shift from reactive "paying out" to proactive "pre-disaster prevention." During this year's 9 earnings calls of multiple listed insurers, El Niño emerged as a frequently discussed topic. While the public often associates it with post-disaster payouts, what truly demands attention is how risk reduction services can be advanced further upstream and how to close the coverage gap for natural disasters.
Increased payout pressure was expected.
According to recent reports from the National Climate Center, a strong Eastern Pacific-type El Niño event officially formed in 9 this year, with the warm sea surface anomaly centered over the eastern equatorial Pacific.
"Forecasts based on domestic and international dynamic climate models and statistical methods indicate that sea surface temperatures in the central-eastern equatorial Pacific will continue to rise over the next 3 months, peaking in late autumn or early winter. This El Niño event is projected to be the strongest since systematic monitoring began," stated the National Climate Center.
For the domestic insurance industry, the most direct impact falls on the claims side. Regarding the effects of a super El Niño event, Li Wenzhong, Deputy Director of the Rural Insurance Research Institute at University of International Business and Economics, stated: First, globally, this super El Niño essentially represents a reallocation of risk, not a simple increase or decrease in overall risk volume. Studies indicate it will significantly suppress Atlantic hurricane activity while simultaneously elevating systemic risks for typhoons in the Northwest Pacific, tornadoes in the U.S., droughts in Australia, and flooding in southern China. Second, the most direct impact of a super El Niño on China's insurance industry is an increase in claim payouts.
Notably, the El Niño event has also become a hot topic during the mid-year earnings calls of listed insurers. Zhang Daoming, Vice President of PICC and President of PICC Property and Casualty Company, stated at PICC's 2026 mid-year earnings conference that, given the expected strong El Niño conditions this year, he anticipates disaster losses in 2026 will exceed those in 2025.
According to industry insights, the types of insurance most likely to trigger claims before and after disasters include agricultural insurance, commercial property insurance, auto insurance, and engineering insurance. These categories face particularly significant payout pressures. Li Wenwen noted that in terms of agricultural insurance, El Niño increases flood risks in southern China and drought risks in the north, while also raising the likelihood of pest and disease outbreaks due to abnormal weather patterns. For commercial property and auto insurance, heavy rainfall-induced urban flooding and mudslides directly impact claim volumes. Regarding engineering insurance, floods and extreme precipitation can damage transportation infrastructure and power facilities, affecting claim performance. For typhoon-related coverage, El Niño shifts typhoon formation locations eastward in the Northwest Pacific, allows storms to linger longer over warmer waters with potentially greater intensity, and pushes their paths northward—all of which significantly elevate catastrophe risk for coastal regions in China.
What more work does the insurance industry still need to do?
The figures on a claims settlement are the outcome, not the cause. The real question is: what can the insurance industry do before a disaster strikes?
The term "risk reduction services" is not new. "In recent years, property insurance companies have aligned with economic and social development trends, actively met the insurance needs of the real economy, and proactively launched disaster prevention and loss mitigation risk reduction services," stated a senior official from the former China Banking and Insurance Regulatory Commission (CBIRC).
As early as 2023, the former China Banking and Insurance Regulatory Commission (CBIRC) issued "Guidance on Actively Carrying Out Risk Reduction Services in Property Insurance," requiring companies to expand service content, actively assist insured enterprises in conducting risk assessments and other risk reduction work; broaden service scope by providing risk reduction services across various property insurance lines including liability, auto, and agricultural insurance. The guidance also encouraged companies to diversify the forms of risk reduction services offered, enhancing accessibility and convenience for policyholders.
The policy framework is clear, but the implementation path must be explored by the industry itself. Li Wenzhong believes that specific measures should focus on: precisely identifying high-risk customers before disasters and intervening early to mitigate risks at their source; promptly issuing disaster warnings to customers and conducting pre-disaster inspections to reduce the likelihood and severity of losses; responding quickly during disasters and implementing engineering interventions to minimize damage; leveraging technology to enhance risk reduction management for greater scientific rigor and efficiency; and establishing an effective incentive mechanism that links disaster mitigation expenditures with loss ratios, dynamically adjusting both to encourage insurers to invest more in long-term risk reduction initiatives.
Risk reduction addresses "how to lower existing risks," while coverage concerns "who will underwrite emerging risks." Data indicates that natural disaster insurance coverage in the Asia-Pacific region is only about 10%, leaving a significant protection gap amid rising typhoon and flood risks.
So, how can we expand coverage for natural disaster insurance? Li Wenbin believes a systematic approach across six dimensions is needed. This includes consolidating and expanding government-led inclusive natural disaster insurance coverage. "This is currently the most widespread type of natural disaster insurance and has the most direct impact on ordinary residents," Li stated. Other key areas include significantly increasing agricultural insurance coverage; using rural housing insurance as a breakthrough to address the largest gap in property protection for rural residents; promoting index-based insurance to overcome coverage bottlenecks caused by the difficulties and delays in traditional claims assessment and settlement; continuously enriching and improving insurance products to better meet consumers' risk protection needs; and strengthening institutional and fiscal support to ensure sustainable expansion of coverage.
In Li's view, agriculture is the sector most directly affected by El Niño and also holds the greatest potential for expanding natural disaster insurance coverage. Key strategies to enhance coverage include focusing on specialized agricultural insurance by incorporating local specialty products into the protection framework to address the issue of "industries without insurance." Additionally, deepening the implementation of full-cost and income insurance—shifting from "cost protection" to "income protection"—will allow farmers to truly experience insurance as a safety net for their earnings.
Beijing Business Today reporter Hu Yongxin
