Insured German flood losses up to €5bn, says GDV

Flooding in the North Rhine-Westphalia and Rhineland-Palatinate regions caused by Storm Bernd in Germany last week is expected to cost insurers between €4bn and €5bn and is set to make 2021 the most expensive year for the German insurance industry since 2002, according to its association the GDV.

The initial insured loss estimate does not include damage in Saxony and Bavaria, and the GDV said it will update the figures next week. Destroyed infrastructure is currently making communication and onsite damage assessment difficult, added the association.

“We currently expect insured losses of €4bn-€5bn,” said Jörg Asmussen, chief executive of the GDV. “The damage is likely to be even higher than that of the August flood in 2002, of €4.65bn. Low ‘Bernd’ is thus one of the most devastating storms in recent history,” Mr Asmussen added.

More than 170 people died in last week’s German flooding and thousands went missing.

Germany and other parts of central Europe had already been hit heavily by severe weather this year, with Aon last week saying that the insurance sector faces a bill of $4.5bn for storms between 17 and 30 June.

Aon said insurers in Austria, Switzerland and the Czech Republic recorded their costliest stretches of severe weather during the period, while Germany experienced the second costliest.

The GDV said heavy rain and hail in June cost German insurers an estimated €1.7bn.

Following the damage from Storm Bernd, the GDV said this year is set to be the costliest for its members since 2002.

“Overall, this year with storms, flooding, heavy rain and hail is likely to be the most damaging year since 2002,” Mr Asmussen said. German insurers suffered cat losses of €10.9bn back in 2002.

AM Best said German insurers’ disciplined pricing means carriers should be well positioned to absorb heightened weather-related losses, despite potential record natural catastrophe claims this year.

Fitch estimates that German insurers’ net combined ratios could be five points higher this year from the recent flood losses. It expects the sector to close 2021 with a combined ratio above the 94% originally forecast but still below 100%.

AM Best believes these latest events, as well as losses earlier in the year, will reignite debate in Germany about the creation of a state-backed natural catastrophe scheme, versus making certain insurance cover compulsory.

It explained that unlike many other European countries, Germany has no such scheme in place and flood risk is excluded from standard industrial, commercial and homeowner policies.

Mr Asmussen was cautious about mandatory insurance. “As a single instrument, we reject it because it takes away the incentive to insure against flood and other extreme weather risks. At best, it would make sense if it were integrated into a new overall concept for land and building planning and disaster protection,” he said.

The federal German government will initially deliver up to €200m in emergency aid for the recent flooding. This comes on top of at least €250m from local state government.

Mr Asmussen said insurers have been working under pressure for days to assess and settle claims in areas affected by recent storms.

“We are doing everything we can to help pragmatically and efficiently, so that our customers’ claims can be processed quickly and without complications. My thoughts are with the people who have lost relatives and friends and those who fear for their belongings,” he added.

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