Insurance-linked investment managers say no impact from European floods


Two investment managers of reinsurance-linked investment funds have announced that while the recent flooding in Europe could become one of the most expensive insured loss events in the region, they do not expect it to have any impact on the performance of their funds, at this time.

Credit Suisse, the manager of the CS IRIS Low Volatility Plus Fund which is the master fund to the DCG Iris ILS fund, said in an update on Friday that it believes that the recent floods could become the most expensive insured loss in Europe since 1999’s windstorm Lothar.

The update from Credit Suisse said; “Currently, estimates range from €3 billion to €5.8 billion ($4 billion to $7.7 billion) but only cover insured losses in Germany. This could make this year’s flooding even worse than the 2002 Elbe flood, which affected a smaller area and caused approximately €5 billion in insured losses (in today’s values). This year’s flood will likely become the most expensive insurance event in Europe since storm Lothar in 1999, which caused approximately $10 billion in insured losses (in today’s values).”

However, Credit Suisse said that it has performed an extensive analysis of the event and that based on a modelled impact assessment and indications from counterparties it does not expect any impact on performance from this event.

Blue Capital Management Ltd. has also provided an update regarding its Blue Capital Global Reinsurance Fund Limited reinsurance-linked investment fund and the European flooding. It said that it expects the flooding to result in significant insured losses for the market, but that having conducted its own post-event loss procedures to estimate any losses it may face itself, it does not expect the flooding to have a material impact on its fund, at this time.

Insurance-linked securities investment manager LGT has also stated that it does not expect any impact to its cat bond funds at this time. LGT did note that some of the reinsurance contracts it allocates assets to do have some exposure to European flooding but that any impact to these contracts would be minor, if at all.

So while the European flood event looks set to become one of the worst insured catastrophe loss events ever witnessed in Europe it will not impact the ILS and reinsurance investment fund market. This perhaps shows that European flood is still an underinsured exposure in many European countries, especially as the economic loss is expected to be much higher, which suggests that over time as insurance penetration picks up, the ILS fund market will likely increase its exposure to European flood events too.

Also read: AIR puts insured losses from German floods at up to EUR 5.8 Billion.

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