flood cat bond

A historic development has occurred in the United States which could see more flood insurance risk making its way into the reinsurance and capital markets, as FEMA has bought its first ever reinsurance cover for the National Flood Insurance Program.

A new suite of high resolution Europe Inland Flood Hazard Data has been released by catastrophe risk modeller RMS, which the firm says provides global insurance and reinsurance firms (and perhaps ILS players) with a greater opportunity to write business for an underinsured risk.

The German insurance industry is facing a loss of $1.4 billion (EUR1.2 billion) from the two storms Elvira and Friederike, as well as other severe weather, which struck the country from May 27th to June 9th 2016, according to association the GDV.

The French Insurance Association (AFA) has released a more formal initial estimate of the insurance industry losses to be expected from the recent French flooding, saying that the final loss could be as much as EUR1.4 billion (approximately $1.6 billion).

Insurance industry losses from recent floods in Germany will likely reach the EUR 1 billion ($1.14 billion) point, according to Fitch Ratings. The losses may weaken the underwriting profitability of the sector and, on top of losses in France and other European countries, are likely to hit some reinsurance layers.

The insurance industry bill from severe flooding and storms affecting Paris and surrounding regions of France will be as much as EUR2 billion ($2.3 billion) or more, according to Pascal Demurger, director general of French mutual insurers group the MAIF.

German insurance industry association the GDV has said today that it expects insurers will face at least $510m (EUR450m) of losses due to storm Elvira’s impacts which struck the country from the 27th to 30th May.

The trend of European and central European countries being hit by convective style severe weather, thunderstorms, rainfall and flooding continues in 2016, with Germany, France and the Czech Republic all suffering in recent days.

The U.S. National Flood Insurance Program (NFIP) needs to embrace risk-based pricing of flood insurance risks and leverage private risk transfer markets and reinsurance capital in order to reduce the burden and improve the flood insurance market, according to the ABIR.

Uncertainty surrounding climate change and its influence on increased frequency and severity of extreme weather events raises questions about the funding adequacy of the UK’s government-backed reinsurance scheme Flood Re, according to Fitch Ratings.