AM Best expects the Mindanao earthquake to cause multiple economic losses, particularly damage to property and infrastructure, but due to the Philippines’ catastrophe protection gap, insured losses are expected to account for only a small portion of the total economic losses.
On June 8, 2026, a 7.8-magnitude earthquake struck the southern Philippines. AM Best predicts that the earthquake will lead to multiple claims for insurance companies and reinsurers underwriting in Mindanao.
The rating agency expects damage to commercial and residential properties, coupled with severe damage to infrastructure, to impact multiple business sectors within commercially important areas.
The domestic non-life insurance market is expected to absorb major-level risks through risk-sharing programs involving direct policies and the Philippine Catastrophe Insurance Fund (PCIF). PCIF was established to concentrate domestic catastrophe risk and reduce the market’s historical reliance on offshore reinsurance capacity.
AM Best noted that Philippine insurers rely on the global reinsurance market to transfer extreme earthquake risks, and said the event could prompt reinsurers to reassess their earthquake models and risk appetite.
However, the ratings agency does not expect any major changes in risk appetite in unaffected regions in the short term.
Susan Tan, senior financial analyst at AM Best, said: “In recent years, major Philippine insurance companies have increased net retention for catastrophe risk, a strategic response to balance high reinsurance costs with profitability targets. As a result, this shift has increased sensitivity to climate risks and exposed the inaccuracies of traditional risk models due to the inherent uncertainty associated with climate change, potentially leading to increased underwriting volatility.”
AM Best also highlighted that while gross premiums have continued to rise in recent years, so have average combined ratios. Claims volatility coupled with higher administrative costs can offset premium gains and impact overall earnings.
Victoria Ohorodnyk, senior director of analytics at AM Best, said: “The earthquake and the disparity between insured and economic losses necessitates catastrophe financing in the region to build resilience to such events. The event highlights the importance of catastrophe risk management for insurers – insurers face greater risks if a catastrophe occurs in one of the country’s more commercial centers, such as Manila.”
