Recent South Germany floods insurance industry loss almost €1.6bn: PERILS

Insurance industry losses from the early June 2024 flooding that impacted southern parts of Germany are initially estimated at close to €1.6 billion by catastrophe data aggregator PERILS AG.

At the equivalent of around US $1.7 billion, PERILS estimate (based on reported insured losses) is lower than those issued by the leading catastrophe risk modellers.

Recall that Verisk’s Extreme Event Solutions had estimated that the flooding in southern Germany would drive insurance industry losses in a range from US $2.6 billion to $3.9 billion.

While, Moody’s (RMS) had put an upper-limit to its insurance market loss estimate at US $3.2 billion.

Lastly, the German insurance association had said the flooding to drive around a €2 billion insurance market loss.

So PERILS first estimate, which it bases on those insurers that report losses to it, is well-beneath the earlier industry estimates, which is either good news for the market, or a sign that its estimate may creep at future updates.

PERILS estimate covers flood losses from May 31st to June 6th 2024 and is for the property line of business only.

The company said the majority of its €1.568 billion industry loss estimate comes from the Bavaria and Baden-Wuerttemberg region.

PERILS explained the driver of this flood catastrophe event, “The flooding was caused by an Atlantic low named “Orinoco”, which deviated from its usual west-east path to move in a south-easterly direction towards the northern Mediterranean, before tracking north-eastwards towards central Europe. Laden with warm and moist air, it continued to track slowly northwards over the Alpine Mountain range, where it underwent uplift and was then blocked over southern Germany by a stationary high-pressure system over Scandinavia. This weather pattern resulted in prolonged, and in some areas extreme rainfall (up to 223mm in three days) over southern Germany. The rain fell on already saturated ground following Germany’s third wettest May since records began in 1881 (after 2007 and 2013). As a result, many streams and rivers overflowed, leading to wide-spread flooding in the states of Bavaria and Baden-Wuerttemberg.”

The company noted that, while this flood event and its insurance industry loss is “significant”, it is not deemed “exceptional” given other flooding events to hit Germany over the last few decades.

Luzi Hitz, Product Manager at PERILS, said, “It is striking that the three wettest Mays on record for Germany have occurred during the last 18 years. At the same time, the country’s average annual temperature has risen by 1.6 degrees Celsius since pre-industrial times.

“Given that the air’s capacity to hold moisture rises with increasing temperatures, it is plausible that the warming climate will result in more precipitation in the form of prolonged periods of heavy rainfall, potentially leading to further floods similar to those experienced in southern Germany in early June.”

As we’d reported before, these floods are likely to be a largely retained loss for insurers, although some impact to the major German reinsurance companies is anticipated, which does mean they could share a portion of their loss with investors in their sidecar and quota share arrangements, albeit small given the relative size of the industry loss.