Central Europe flood insurance market loss estimated $2.8bn – $3.9bn: Moody’s RMS

Moody’s RMS Event Response is the latest to provide an estimate for insurance market losses caused by recent severe flooding across parts of central Europe in September, giving a slightly more expansive footprint of the event than others, to land at an estimate for insured losses of between €2.5 billion and €3.5 billion (US $2.8bn to US $3.9 bn).

Moody’s RMS Event Response’s loss estimate includes insurance impacts across what it sees as the most affected areas, of the Czech Republic, Austria, Poland, Slovakia, Hungary, Germany, and Italy, but the majority of the loss is expected to be driven by the Czech Republic, Austria, and Poland, the company said.

Yesterday, Verisk issued an insurance industry loss estimate of EUR 2 billion (~US $2.2 billion) to EUR 3 billion (~US $3.4 billion) for the same flooding event, but this was excluding losses in Germany and Italy it seems.

Also for comparison, a €2 billion to €3 billion industry loss estimate range was indicated by reinsurance broker Gallagher Re.

While S&P Global Ratings had said that it anticipates the insurance market loss from these floods to be around €2.2 billion across Czechia, Poland, Austria, and Romania.

S&P had also said that it it expects a significant share of the insurance claims from the European flooding will be covered by reinsurance capital.

Broker Aon’s Impact Forecasting unit gave an industry loss estimate for the Central Europe Flooding in September 2024, caused by Storm Boris, of €1.65 billion.

While our sister publication Reinsurance News had also reported that with Generali’s European flood per event reinsurance coverage kicking in after a €300 million attachment, the insurer is said likely to make a reinsurance recovery on Storm Boris by analysts at Goldman Sachs.

The Moody’s RMS estimate covers the widespread flooding triggered by heavy and persistent rainfall between September 11-19, 2024, across a wide area of central and eastern Europe that stretched as far as Romania.

“Low-pressure systems with trajectories from the Mediterranean across central Europe are also known as Van Bebber Vb-type cyclones and have been responsible for some of the most severe central and eastern Europe flood events, such as in 1997, 2002, 2013, and most recently in May/June this year,” the company explained.

Adding that, “These 2024 European flood events, notably in May/June and now September, again highlight how important from a flood modeling perspective it is for the insurance industry to realistically capture key elements such as antecedent conditions, Vb-type events, cross-country correlations, flood defenses, and combined fluvial and pluvial flooding.”

Steffi Uhlemann-Elmer, Director, Model Product Management, Moody’s, commented: “This September’s flooding has been a reminder of the long history of severe and widespread summer flooding that can affect many countries simultaneously over central and eastern Europe.

“This event was unique in several ways. Firstly, the low-pressure system named ‘Storm Boris’ was long-lived and brought heavy rainfall and flash flooding to a large area from eastern Romania to northern Italy. After its destructive rainfall over Austria, the Czech Republic, and Poland, Boris was continuously supplied by moist air masses, and took a westward track, bringing extreme rainfall to Italy’s Emilia Romagna region. In recent history, only the August 2002 flood event has impacted a wider area.

“Secondly, the weather pattern and associated severe rainfall and flooding were forecast over a week in advance. Warning chains and catastrophe response plans to coordinate efforts across states, regions, and communities had been activated, and preventive measures such as the release of water from reservoirs before the event had been taken.

“Thirdly, investments in flood defenses have paid off. Given the long history of flood events across the region, substantial investments were made over time to replace and redesign existing defenses, and to add new risk mitigation structures such as dams, dykes, and flood retention areas.

“These measures made a substantial difference in the loss outcome for this event compared in particular to the 1997 and 2002 events. Most notably, the event did not lead to serious inundation of build-up areas along the major Rivers’ Elbe, Danube, and Oder, as the flood wave that accumulated from the mountainous regions was either capped through retention or safely propagated through cities with heightened flood defenses.

“Yet, communities and states are facing a large bill to repair or rebuild infrastructure and bail out uninsured households. Although flood insurance penetration has generally increased over the last two decades, take-up of home insurance that includes flood coverage is still very low in regions such as Italy, Poland, and others, or where coverage is limited such as Austria.

“Most of the overall estimated insured losses will be retained by insurers, but some reinsurance recovery is to be expected. Overall, 2024 marks another costly year with several flood events on the balance sheet of insurers. Proactively managing severe weather risk and understanding correlation not only across countries but also across perils becomes ever more important.”