European flood industry loss seen up to US $3bn by Berenberg

The insurance and reinsurance industry loss from recent European flooding could be as much as US $3 billion, according to an early estimate from analysts at investment bank Berenberg, although our sources in the industry are suggesting it could be higher still once all damage claims are counted.

Flooding in Germany, photo from Christoph Reichwein – AFP

As we explained yesterday, a unit of insurance and reinsurance broking giant Aon has said the industry loss is likely in the multiple billions of Euros.

Berenberg’s estimate of between US $2 billion to as much as $3 billion is aligned with some early chatter in the reinsurance market, but it remains early days and there is the chance the high-end of this range is challenged, especially as floods have been ingoing in Austria over the last day or so.

These floods are a “poor start to Q3, especially for catastrophe-exposed companies,” the analysts at Berenberg explained.

The first-half has seen catastrophe losses fall below average, it is thought, despite the heavy toll from US winter storms, as we explained recently here.

“The European floods are estimated to have cost the reinsurance industry several billions of dollars; we estimate between $2bn-3bn,” Berenberg’s analyst team wrote.

Adding that, “The companies we believe are most exposed to European flood events are likely to be Ageas, Allianz, AXA, Baloise, Generali, Helvetia, Talanz and Zurich.”

Given the insurers mentioned above, it’s clear Berenberg is referring to the loss for the insurance and reinsurance industry, not just reinsurers.

On reinsurance firms, the analysts said, “Losses to primary insurers are unlikely to be large enough to trigger single event-based reinsurance coverage, and consequently losses to the reinsurers will be relatively small when looking at the European floods in isolation. However, these losses will likely contribute to aggregate catastrophe treaties and will raise the risk that reinsurers will end up paying out larger amounts for 2021 on this type of cover.”

There’s a lot of damage to account for and insurance for flood damage has far less uptake than other types of property damage coverage in Europe, meaning estimates are likely to change.

In fact, some of our sources suggest that the eventual impact to the insurance and reinsurance industry is likely to be higher, with a number of industry sources pointing to an estimate range of between US $3 billion and US $5 billion, to include the impacts that have been ongoing in Austria over the last two days.

The German insurance industry association GDV said this morning that it believes the damages for the sector will prove to be “enormous” and that it expects to have an initial loss estimate later this week.

But despite that, this does look set to become one of the more costly flooding events Europe has ever seen, certainly in terms of the overall impact to the lives and livelihoods of those affected.

Also read:

– European flood losses expected in the multiple billions of Euros: Aon.

– Europe floods won’t impact cat bonds, show need for protection: Plenum.

– Ongoing European flood event to drive industry losses in the billions.