Reinsurance protects Allianz from Storm Bernd losses
Although Allianz has lifted its gross estimate from European flood claims by +22% to €1.1bn, reinsurance appears to have limited the net loss to just €0.4bn, according to a note from analysts at investment bank Jefferies.
In the aftermath of July’s Storm Bernd, Allianz received more than 25,000 claims, with new claims still being reported. The company advanced up to €10,000 to affected customers and had already paid out €112m within the first month after the storm.
The 22% uplift means that Storm Bernd has cost Allianz even more than the €917m claims impact of the Elbe flooding in 2002: “We understand that this €1.1bn gross loss includes c.€700m from clients of Allianz Deutschland and c.€100m from Allianz Global Corporate & Specialty (AGCS), with presumably a large part of the remaining c.€300m coming from Belgian policyholders,” Jefferies said.
However, Allianz reiterated its guidance that the net loss would cost only €0.4bn: “Looking to the group’s reinsurance, last published in June 2018, we find that Allianz purchases a €2.6bn per event reinsurance contract, covering western and southern Europe (including Austria).
“As the €1.1bn gross loss sits below €2.6bn, then Allianz would be expected to pay the €0.3bn retention and a modest amount of reinstatement premiums, taking the net loss to €0.4bn, in line with management’s estimate. Should the gross loss rise further, there is still considerable headroom to €2.6bn for reinsurance recoveries, so no additional net losses should be expected,” Jefferies concluded.
In addition, Jefferies said the group has additional aggregate reinsurance that covers the combined cost of multiple losses. Should further natural catastrophe losses arise and take the total above €1.3bn, this cover would incur losses: “As such, Allianz appears relatively well protected against further flooding events.”
Jefferies noted that Allianz group does not have a domestic US business and it does not expect the group to incur a material P&C loss from Hurricane Ida: “Any losses that the group has incurred are likely to be part of the commercial lines business of AGCS, where management have been cutting volumes and materially lifting prices.”