Germany storm Ela’s $900m loss could hit collateralized reinsurance

Wind and hail storm Ela which caused approximately $900m of insured losses when it struck Germany on 9th – 10th June, is second most damaging summer storm seen in fifteen years according to the country’s insurance association.

Update: The reported insurance industry losses from Ela now pass $2 billion.

Ela brought damaging winds of 144kph, torrential rainfall and severe hail to North Rhine-Westphalia, Hesse and Lower Saxony when it struck in early June. Losses reported by German insurers to date total €650m, which is just slightly under $900m, but loss estimates have yet to be released by the largest insurer in the country Allianz as well as the large reinsurers Munich Re and Hannover Re.

That means the insurance industry loss is likely to rise about $1 billion, making Ela clearly the second most damaging storm in fifteen years, after last July’s Andreas which caused €1.9 billion of insured losses.

Property insurers have been dealing with 350,000 claims from property losses amounting to €400m, while auto insurers have counted another 100,000 claims adding another €250m. According to Reuters German railway company Deutsche Bahn faces €60m of losses to its earnings due to the storm, demonstrating that the knock on effects of direct damage from storms can have a large effect on corporates.

Last years German hail and wind storm event Andreas resulted in some exposure within the collateralized reinsurance market, as insurance-linked securities (ILS) players participation in some major reinsurance programs were hit to a degree. This led to some impact to at least one ILS fund’s August 2013 return as it reported a loss from the German hail event.

Given the increasing penetration of ILS capital and private collateralized covers within major European reinsurance property catastrophe programs, it’s reasonable to assume that there will at least be some exposure to the losses suffered on June 9th and 10th, even if there is no direct loss.

With more hail storms and severe weather forecast for Germany and much of the summer left to run there is plenty of time for the attrition of multiple storm losses to bite for some collateralized capacity providers or ILS funds participating in this area.

Losses from hail events in Europe last summer rose to over $5 billion, while German catastrophe losses in 2013 from hail, wind and flood largely amounted to over $9 billion. The exposure in this region is large and as more third-party and ILS capital participates in the large reinsurance placements covering the area the collateralized market will naturally become more exposed to events such as the hail seen in June.

Also read: Hail losses no longer attritional, hail reinsurance recommended: RMS.