Natural disasters in Germany cost insurers €12.5bn in 2021

This year, 2021, has been the most costly on record for the German insurance industry, as industry losses reached around €12.5 billion, with the largest contribution coming from the summer flooding.

Flooding in Germany, photo from Christoph Reichwein – AFP

“With insured damage to houses, household items, businesses and motor vehicles of around 12.5 billion euros, 2021 will be the most expensive year of natural hazards since statistics began in the early 1970s,” explained Jörg Asmussen, General Manager of the German Insurance Association (GDV).

In total, €9 billion of the insured losses are attributable to flood and rainfall related damage to residential properties, household contents and businesses, while another €2 billion are attributable to other storm and hail damage.

The final €1.5 billion are related to natural hazard claims for damage to motor vehicles, the GDV said.

It’s the most costly year on-record for Germany’s insurance industry, eclipsing the €11.3 billion of losses suffered in 2002, as well as the €11.5 billion of losses from severe European windstorm activity in 1990.

To give a good measure of how unusual this level of catastrophe loss is for Germany’s insurance market, the long-term average is estimated at around €3.8 billion.

July’s flooding is estimated as an €8.2 billion insurance market loss now, which is up slightly on previous estimates by the GDV and is now around US $9.3 billion.

“With 8.2 billion euros, the flash flood caused the highest insurance losses in the summer. We have already paid out over three billion euros to our customers within a short period of time,” Asmussen said.

Roughly €7.7 billion of the July flood losses are from residential property, contents and businesses, with the remaining €450 million from motor insurance claims.

The severe convective storms in June are seen as a €1.7 billion industry loss for Germany’s insurers, and hail was the main driver making it the fourth largest hail loss on-record.

“In June, it was mainly motor vehicles that were affected by severe hail damage with a loss of around 700 million euros,” said Asmussen. “For motor insurers, there were also above-average losses in 2021.”

The GDV wants to ensure all losses are covered in future and aims to mandate natural catastrophe coverage within property insurance policies.

“Basically, the GDV proposals provide that in future there should only be residential building insurance policies that also cover so-called elemental hazards such as floods and heavy rain,” Asmussen said. At the same time, the insurance industry is calling for a sustainable change in direction by the public sector, for example through clear building bans in flood-prone areas and mandatory climate risk assessment for building permits.”

The Germany natural catastrophe losses of 2021 have caused reinsurance rates to rise and driven a more challenging European reinsurance renewal environment than has been seen for many years.

Most carriers have faced reinsurance price increases, we understand, while reinsurers are finding retrocession and quota share reinsurance pricing elevated as well.