Catastrophe risk modeller AIR Worldwide is in close agreement with the German insurers association, in saying that it expects the insurance and reinsurance market will face close to EUR 5 billion of losses from flooding that hit the country recently.
AIR explained that low pressure system “Bernd” was relatively stationary across central Europe and brought significant flooding to the region from July 13 to 18.
Germany’s Rhineland-Palatinate and North Rhine-Westphalia regions were particularly affected, while the border region between the German states of Bavaria, Thuringia, and Saxony was affected by localised flooding as well.
As a result, AIR analysed hourly precipitation fields over Germany using data from NASA’s Global Precipitation Measurement (GPM) system during July 5 to 19.
The company also reviewed daily observed rainfall data from over 1,600 gauging stations, to improve the quality of the GPM precipitation input.
However, it’s important to note, that AIR’s loss estimate is limited to just two river basins within Germany, the catchments of the Rhine and Danube basins, as it says the vast majority of losses for this event within Germany came from there.
So AIR’s estimate of up to EUR 5 billion in insurance and reinsurance market losses is only based on a segment of the affected area, which perhaps lends additional weight to the GDV’s estimated up to EUR 5.5 billion loss pick.
AIR said that its loss estimates include insured physical damage to property (residential, commercial, industrial, auto, agriculture), both structures and their contents, from both on- and off-floodplain flooding.
The risk modeller noted that other countries and regions, including Belgium, Switzerland, Austria, Luxembourg, and the Netherlands’ southernmost province Limburg, all experienced flooding, but were not included in AIR’s loss estimate.
Interestingly, AIR believes that for reinsurance purposes the flooding will constitute a single occurrence, which we’d expect would elevate the chance of reinsurance contracts attaching for ceding companies.
AIR says many reinsurance contracts are subject to an hours clause, which is typically 504 hours for flood events. Hence, given the duration of these floods, AIR believes they are likely to be treated as a single occurrence in Germany.
That has some ramifications for the reinsurance market, as well as for retrocession, plus the ILS market, making it more likely attachment points are breached and losses shared with reinsurance capital.