European windstorm insured losses head towards EUR 3bn
Forecasts for insurance and reinsurance market losses from the recent spell of severe European windstorms are heading towards EUR 3 billion (approx. US $3.4bn), as reports coming from the UK, Germany and the Netherlands alone get close to that number.
As we reported yesterday, insurance and reinsurance markets are facing losses into the billions after the impacts of two of the severe European windstorms, Dudley (Ylenia) and Eunice (Zeynep).
Early estimates from PwC placed the UK insured loss from these two windstorms at up to UK £425 million, while German actuarial consultancy Meyerthole Siems Kohlruss (MSK) said it expected around EUR 1.4 billion of insured losses in Germany.
As we reported at the time, a third European windstorm named Franklin in the UK, Ireland and the Netherlands, or Antonia in Germany and the rest of Europe, was also set to drive additional impacts and losses.
Now, some estimates have emerged incorporating that third severe windstorm and it takes the overall insurance market loss from this storm activity towards the EUR 3 billion range.
Windstorm Franklin (Antonia) drove additional damage in the UK, but no updates to PwC’s estimate are available, so to-date our sources in the market appear to be working on an estimate of UK £380 million to £480 million (EUR 450m to EUR 575m) for the three storms for the UK only.
German actuaries Meyerthole Siems Kohlruss (MSK) have updated their insured loss estimate to incorporate storm Franklin (Antonia) and now suggest the three storms may have driven around EUR 1.6 billion of losses.
“The storm field of the Antonia low (international name Franklin) crossed Germany in the night of February 20th to 21st, 2022 and caused insured losses of 200 million euros,” explained Onnen Siems, Managing Director of MSK.
He added, “The total damage amount of 1.6 billion euros for Ylenia, Zeynep and Antonia is easily exceeded by individual storm events such as Kyrill 2007, but it still represents a turbulent start to the damage year 2022.
“The insurance industry can handle claims of this magnitude well. However, the year is still young and further storm or flood events could put the division in the red like in the previous year.”
The Dutch Association of Insurers, of the Netherlands, has now also made an industry loss estimate for these three European windstorms and suggests the bill for the countries insurers will reach minimum EUR 500 million.
“Insurers receive record numbers of damage reports due to these storms and expect a lot of consequential damage,” the Association said.
So, adding up the estimates for the United Kingdom, Germany and the Netherlands, we come to a potential insurance and reinsurance market loss in the region of EUR 2.6 billion to EUR 2.7 billion, as reported.
But given the Netherlands is forecasting insured losses there will rise above its estimated EUR 500 million, plus this does not include any data on windstorm damages in Belgium, France, Poland and other affected countries, it is likely the eventual insured loss tally across these three European windstorms will surpass EUR 3 billion (around US $3.4bn).
There are implications for the reinsurance market, not least because these three storms impacted northern and western Europe over the space of just a few days, from the 16th to 21st February, bringing the hours clause into focus.
Analysts have noted that the spate of windstorms have pressured some European primary insurance company shares.
One company mentioned by analysts at JP Morgan is NN Group, the insurer that recently sponsored its first catastrophe bond, the European windstorm exposed Orange Capital Re DAC (Series 2021-1).
NN Group operates on a 72 hours clause in its reinsurance, which suggests two of the three windstorms we’re discussing above could qualify under the terms of its reinsurance.
NN Group has an EUR 75 million per event retention, while the Orange Capital cat bond only attaches at EUR 325 million. So without a doubt the cat bond is safe.
But there are reinsurance implications from such a time-compressed European windstorm outbreak and it will be interesting to see how some European insurance carriers leverage their hours clauses to bring more than one storm under a single claim, or whether it’s preferable in some cases to keep them separate.
At the individual level, the losses from these windstorms still won’t affect any pure Euro wind catastrophe bonds, while there aren’t any aggregate Euro wind cat bonds in the market at the reinsurance level.
There are still implications for the erosion of aggregate deductibles and that could also get more interesting, depending on how hours clauses are applied.
Also read:
Billion plus storm losses expected from Dudley (Ylenia) & Eunice (Zeynep).
No cat bond losses from Euro storms, but aggregate implications: Plenum.
