Late August western Europe SCS and hail to drive ~EUR 2.5bn insured loss: Gallagher Re

Reinsurance broker Gallagher Re has estimated that a late August severe convective storm (SCS) and large hail outbreak across parts of western Europe will drive insurance industry losses of around EUR 2.5 billion.

Gallagher Re explained, “A low-pressure system, named Raphaela by the Free University of Berlin, brought highly impactful severe weather to regions of France, Switzerland, and Italy between 27 and 28 August, with losses driven by large hail. Prior to Raphaela, another low named Quiria generated instances of large hail, damaging winds, and tornadoes in western France and surrounding regions between 24 and 26 August.”

The reinsurance broker further stated, “The severe convective storm (SCS) outbreaks from 24 to 28 August caused extensive damage across multiple European countries, with the most significant impacts concentrated near densely populated areas. The most severe stretch of weather occurred between 27 and 28 August with industry losses anticipated to approach EUR 2.5 billion, of which EUR 0.75–1.25 billion is expected to come from Switzerland, around EUR 0.5–1 billion from Italy, and EUR 0.5–0.75 billion from France. The overall direct economic toll will be even larger.”

This comes on the heels of a major European severe convective storm event in July, which PERILS estimated would cause an industry loss of almost EUR 2.2 billion.

Which makes for a very costly period of severe and convective weather across Europe, with meaningful losses for the insurance and reinsurance industry for this peril.

Gallagher Re further explained on the late August severe weather outbreak, “Lines of severe storms and supercells resulted in significant damage to residential and commercial properties, vehicles, and agribusiness operations in eastern France on 27 August before shifting into Switzerland and northern Italy on 28 August. Storms were also accompanied by damaging straight-line winds.

“Giant hail exceeding 10 cm (3.9 in) hit Italy’s Emilia-Romagna, Lombardy, and Veneto regions, while the largest hailstones measured in France reached 9 cm (3.5 in) in diameter and exceeded 7 cm (2.7 in) in Switzerland.”

There are a number of catastrophe bonds which carry some level of exposure to severe thunderstorm and convective storm events in Europe, as well as other private insurance-linked securities or collateralised reinsurance deals and sidecar structures.

At this stage it’s too early to know whether there could be any impact to any exposed ILS structures from this recent aggregation of SCS events across Europe.

These losses help to drive home the fact that this is a significant catastrophic peril for the insurance industry in the region.

As a result, use of the capital markets for reinsurance to protect their balance-sheets when outsized events might occur remains a sensible option.