Insurance Estimates Reveal Significant Losses from Rasuwa Floods Less Than a Year After Previous Disaster
Summary: The Rasuwa floods have caused extensive damage to hundreds of vehicles, hydropower projects, homes, bank branches, and containers, leading to insurance liabilities potentially exceeding initial estimates. According to the Nepal Electricity Authority, the floods severely affected 12 operational and 15 under-construction hydropower and solar projects. Sunilballabh Pant, General Secretary of the Non-Life Insurers’ Association, stated that detailed loss assessments will take four to five days and that insured assets will be compensated accordingly.
Kathmandu, September 12: Less than a year after the devastating floods in Rasuwa and the protests on September 7-8, insurance companies with substantial liabilities are now facing another significant wave of claims. The flood damage from Wednesday morning is expected to result in insurance payouts exceeding projections, as the disaster destroyed hundreds of vehicles, imported goods, hydropower installations, private homes, nine bank branches, and numerous cargo containers. Additionally, some uninsured losses in agriculture and livestock insurance are expected to contribute to further liabilities.
The Nepal Electricity Authority has reported that the floods seriously damaged 12 operational hydropower plants and one solar project, while 15 more under-construction projects sustained major impacts. The combined capacity of these affected plants totals approximately 900 megawatts. Moreover, flood damage extended to customs yards, vehicles in transit, private residences, hotels, and other properties.
According to Sunilballabh Pant, General Secretary of the Non-Life Insurers’ Association, the volume of insured assets damaged in the Rasuwa floods is higher compared to previous disasters. A government study showed the September 7-8 protests caused damages worth NPR 8.4 billion, resulting in insurance claims of approximately NPR 2.345 billion. Though many government properties were damaged during that unrest, they largely lacked insurance coverage, minimizing insurers’ financial burdens. In contrast, the April 2015 earthquake caused NPR 900 billion in damages but insurance liabilities totaled only around NPR 17 billion, mainly due to low personal asset insurance penetration. Conversely, the Rasuwa floods affected numerous insured assets, including public projects, vehicles, and homes, increasing insurance companies’ exposure.
Pant added that it is too early to determine the exact claim amounts. “There are many insured assets damaged by the flood, including hydropower projects and vehicles swept away. Insurance-related losses could be substantial,” he said. He noted that detailed damage assessments will require an additional four to five days. Insurance companies will conduct local evaluations of insured properties to arrange payments. Given that hydropower plants have been submerged and washed away, accurate and stable damage measurement remains challenging. Valuing bank assets will also take time, especially because of difficulties assessing cash and pledged gold assets. Pant remarked, “We anticipate that this insurance claim could surpass those related to the earthquake and recent protests.”
He emphasized that insurers must focus on how much liability to assume and the risks they can manage, noting that risk capacity varies between companies. Currently, discussions are ongoing between the Insurance Authority and the insurers’ association regarding management arrangements. While insurers typically bear 35% risk for damage caused by riots and strikes, this ratio differs for flood and hydropower-related incidents and remains uncertain. Pant advised insurance companies to enhance their preparedness for damage management.
Sushil Dev Subedi, Executive Director of the Nepal Insurance Authority, stated that there would be no issues regarding the payment of claims for insured properties damaged by the Rasuwa floods. “Proper damage valuation appears feasible although it is challenging to conduct accurate assessments on-site due to the nature of the flooding,” he said. The non-life insurance sector currently holds a portfolio worth approximately NPR 300 billion and is confident about handling post-disaster claims. He recommended direct observation of the hydropower projects to better estimate damages. Despite existing challenges, the insurance sector is expected to respond effectively. Subedi also mentioned that reinsurers could bear a larger share of liabilities than domestic insurers due to risk structures in hydropower projects. “Reinsurance companies may face more substantial obligations than insurance firms in these projects,” he noted.
A shortage of skilled professionals in the insurance sector is likely to cause delays in timely assessments and claim settlements. Infrastructure Minister Sunil Lamsal estimated that physical damages from the Rasuwa floods exceed NPR 200 billion, with approximately NPR 4 billion in damage to bridges and roads alone. In the 2015 earthquake, 19 hydropower projects were also affected, with independent power producers claiming damages of around NPR 230 million. At that time, power generation of 80 megawatts was disrupted.
