Analysts at Berenberg have warned that recent flooding in parts of Europe will drive reinsurance industry losses of between €2 billion and €3 billion, while the economic hit from the event is projected to be much higher.
Last week’s flooding impacted many parts of Central and Western Europe, including Belgium, the Netherlands, and Switzerland, although Germany remains the worst affected region.
So far, the heaviest rainfall in a century has claimed 188 lives as flash floods ripped through parts of Europe and rivers burst their banks, bringing extensive damage to properties.
According to Berenberg, the flooding is likely to drive a reinsurance industry loss of up to €3 billion, although given that flood is a woefully underinsured risk in Europe, it’s possible that the economic burden will end up much higher.
Berenberg analysts say that the floods in Germany in 2013, which caused an industry loss of €1.8 billion, are a good guide for the recent floods.
The message from Berenberg is similar to that of re/insurance broker Aon, who said recently that despite a multi-billion industry loss, the majority of the recent flooding in Europe is not covered by protection.
This is yet another sign of the vast protection gap (disparity between economic and insured losses post-event) that exists in much of the world, in both mature and emerging markets.
The catastrophic flooding comes after what Berenberg says has been a relatively benign period for claims in Europe for the majority of H1 2021, although hailstorms in June in Germany and Switzerland are expected to cost re/insurers $4.5 billion.
“In our view, we would still be long into H1 numbers for the sector given the companies are still benefiting from lower claims frequency from COVID-19, but the floods are a poor start to Q3, especially for catastrophe-exposed companies,” say analysts.
Berenberg’s analysis identifies Ageas, Allianz, AXA, Baloise, Generali, Helvetia, Talanx and Zurich as the most exposed to the floods.
For reinsurers, analysts expect that losses will be fairly low when looking at the European flooding in isolation, but warn that these will contribute to aggregate cat treaties and ultimately increase the chance that reinsurers will end up paying out larger amounts on this type of coverage in 2021.