Paris & France floods & storms could cost insurers over EUR2bn: MAIF

by Artemis on June 4, 2016

The insurance industry bill from severe flooding and storms affecting Paris and surrounding regions of France will be as much as EUR2 billion ($2.3 billion) or more, according to Pascal Demurger, director general of French mutual insurers group the MAIF.

Paris flooding image via Straits TimesSpeaking to news agencies yesterday, Demurger said that his organisation (the Mutuelle d’Assurance des Instituteurs de France) believes that the bill for insurance and perhaps reinsurance markets to pay for will be at least three times that seen in the 2015 southeastern France floods, which cost around EUR600m.

Demurger suggested the bill will end up in the region of EUR2 billion (one news agency reported EUR1.8bn ($2.1bn) to EUR2.4bn ($2.7bn) as the potential range), which would be a significant impact to the French insurance industry if so, with major primary insurance companies likely to take a large retention and some of the loss being passed on to global reinsurance markets, if the final bill is indeed that high.

With flooding still ongoing, the Seine in Paris has now reached a peak it is thought but there are further thunderstorms forecast for tomorrow (Sunday) which could cause further rises in river levels.

Demurger said that even when the waters do begin to subside it would be some days or weeks before flood waters drained away completely and that when this stagnant water is sitting in residential areas it can cause the greatest levels of damage.

So far over 43,000 claims cases have been lodged and that number is rising, but with flooding ongoing many claims will not yet have been notified and the total is expected to be significantly higher.

Insurers Covéa and Macif are said to be most exposed so far, with 15,000 and 11,300 claims registered respectively from storms and flooding in the last week. Axa has about 2,900 claims, Groupama 1,800, Generali around 1,100, Matmut 5,000 and the MAIF over 6,300. These figures are as at Friday 3rd, so will have risen considerably higher it is thought by the start of next week.

Bernard Spitz, President of the French insurance association said that he expects the insurance industry loss from the flooding and storms in France will be higher than seen in 2015 (EUR600m). But Demurger said at least three times that number and if the threat of further storms and floods in the next couple of days manifests, the final bill could keep rising.

Demurger estimate of three times the cost of 2015 floods is just for personal insurance claims and does not include any estimate of commercial claims, so he said the final bill is likely to be around EUR2 billion.

With storm damage and flooding also affecting Germany, Belgium and the Czech Republic in the last week European insurance and reinsurance firms, as well as global reinsurance players with exposure, could find themselves picking up quite a bill.

Again, the size of the losses are never going to turn this soft reinsurance market on their own, but added to the global catastrophe and severe weather experience of the last few months the reinsurance bill is increasing and could cause some companies to question the very low rates, particularly in Europe, that property catastrophe reinsurance cover has been sold at lately.

As ever, there is a chance of some insurance-linked investment fund or ILS exposure, either to ILS managers underwriting European catastrophe reinsurance on a collateralised basis, providers of collateralised retrocession or through reinsurance sidecars which take quota shares from the leading reinsurers.

The size of the potential loss also demonstrates that there could be a roll for flood catastrophe bonds in major European cities such as Paris, as well as for the much-discussed resilience bonds, which tie in catastrophe risk transfer with resilient infrastructure development.

With Paris still awash, more storms on the way for Europe and the weather pattern looking fairly locked for the next few days, the eventual bill for insurance and reinsurance capital to settle looks set to grow.

Also read:

Storm Elvira to cost German insurers $510m+, says GDV.

Summer storm floods & hail hit Germany, France, Czech Republic again.

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