South German flooding industry loss stable at just under €1.6bn: PERILS

According to PERILS AG, insurance industry losses from the early June 2024 flooding that impacted southern parts of Germany are relatively stable at just under €1.6 billion.

PERILS issued a first industry loss in July, providing a €1.568 billion estimate that largely covered insured impacts from across Germany’s Bavaria and Baden-Wuerttemberg region.

Recall that Verisk’s Extreme Event Solutions had estimated that the flooding in southern Germany would drive insurance industry losses in a range from US $2.6 billion to $3.9 billion.

While, Moody’s (RMS) had put an upper-limit to its insurance market loss estimate at US $3.2 billion.

Lastly, the German insurance association had said the flooding to drive around a €2 billion insurance market loss.

Today, PERILS updated the market with its second industry loss for this event, putting the figure at €1.59 billion, so just slightly higher.

Christoph Oehy, CEO of PERILS, commented: “Insurance companies tend to base early loss estimates partly on insights from similar past events. If no such precedent exists, loss projections can be challenging, often leading to underestimates and subsequent revisions. In Germany, insurers have experienced several major recent flood events, with resulting insights potentially contributing to more robust early loss estimates for the Southern Germany Floods, and as a consequence a modest movement between the first two PERILS industry loss numbers. This is in marked contrast to events with no recent precedent, where loss development can be much more significant, such as the Kahramanmaras Earthquake in Turkey and the hailstorms in Italy in 2023.

“The Southern Germany Floods is the 82nd Cat event we have covered since PERILS was founded 15 years ago. Among many other uses, this kind of industry loss data is used as triggers in insurance-linked securities and industry loss warranty transactions. In the last 15 years, the sum of all limits using PERILS as the industry loss reporting agency amounts to USD 23.6bn through 487 individual transactions. It is testament to the trust the markets put in us. The success of PERILS owes much to the willingness of insurers to provide us with their insured exposure and loss data for which we are extremely grateful. This enables us to provide high-quality industry data, providing valuable insights to better understand Cat risk.”

As we reported recently, these floods were relevant to the catastrophe bond market.

German insurer Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts’ (VKB) recently said that its losses from the flood event remained well-below the attachment point of its King Max Re DAC 2023 catastrophe bond.

With this latest update from PERILS, it suggests little creep in losses from this episode of German flooding, it is likely VKB’s losses will not rise much further either, so the King Max cat bond will likely remain safe from any loss.

These floods are likely to be a largely retained loss for insurers, although some impact to the major German reinsurance companies is anticipated, which does mean they could share a portion of their loss with investors in their sidecar and quota share arrangements, albeit small given the relative size of the industry loss.