Analysts at Fitch Ratings are estimating that a series of recent storms that battered much of northern Europe will together cause gross insured losses of as much as €5 billion.
Source: Joe Giddens/PA
Storms Dudley, Eunice and Franklin caused widespread wind and flood damage last week with particularly severe impacts in the Germany, the UK and the Netherlands.
But while Fitch expects to see a large insured bill in the aftermath, it does not expect the losses to burn through insurer’s earnings, materially erode capital or affect ratings.
This is partly because it expects reinsurance programs to be heavily utilised in many cases, which could end up absorbing the majority of costs and reducing the load on primary insurers to under €2 billion.
Looking at Germany specifically, Fitch expects losses to reach up to €2 billion, with reinsurance likely to absorb more than half of this figure, depending on whether contracts count the storms either as a single event or separate events.
This would add about one percentage point to the non-life sector’s net combined ratios, Fitch estimates, which would be modest compared with the impact from the German floods in the summer of 2021.
In the UK, Storm Eunice brought record-breaking wind speeds, causing widespread disruption, but Fitch does not expect wind damage to drive abnormally high claims, possibly in the region of £400 million.
However, the ultimate losses in the UK could be significantly affected by further flooding following Storm Franklin as flood damage, although more localised than wind damage, tends to lead to costlier insurance claims.
“While we do not expect the storms to affect UK non-life insurers’ ratings, the losses will weaken profitability, which is already under pressure from claims inflation and subdued premium rates,” Fitch warned.
In the Netherlands, Fitch believes insured losses from the storms could exceed €500 million, which was the preliminary figure released by the Dutch Association of Insurers.
The losses may increase further due to persistent high winds but analysts do not expect the storms to add more than 3 percentage points to the Dutch non-life sector’s combined ratio.
“This still represents a significant dent to profitability but most major insurers should be able to absorb the impact given their reasonable underlying profitability and diverse business models,” the rating agency noted.
