European floods threaten insurers with worst losses in decades

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(Bloomberg) –Deadly floods that unleashed destruction across central and eastern Europe will generate some of the worst regional losses for insurers including Powszechny Zaklad Ubezpieczen SA, Vienna Insurance Group AG and UNIQA Insurance Group AG. 

Central Europe’s insured flood losses will likely be €2 billion ($2.2 billion) to €3 billion, Global reinsurance broker Gallagher Re estimates. That would rival the costs of the catastrophic floods of 1997, 2002 and 2013, Bloomberg Intelligence data shows. Other insurers with exposure include Generali and Allianz SE.

Austrian insurers see damage claims reaching a record €600 million to €700 million, with damages having the potential to reach as high as €1 billion, the Austrian Association of Insurers said. Wiener Staedtische, a unit of VIG and Austria’s second-largest insurer by total premiums, expects as much as €100 million in claims related to the recent flooding and storms. That’s the largest in the company’s history from a natural disaster. 

The industry faces an increasing level of catastrophe claims from secondary perils, much of which can be linked to climate change. “Reinsurers raised prices and retentions last year with the results that a higher proportion of these losses are now being borne by primary insurers and this is likely to be a continuing trend,” Bloomberg Intelligence Senior Analyst Charles Graham said.  

UNIQA and VIG have the most exposure given their leading positions in Austria, while PZU has the dominant share in Poland. Flood-affected countries make up 80% or more of non-life revenue at all three. Residential flood insurance is more common in Austria and the Czech Republic than it is in Poland, likely skewing payouts by country, Bloomberg Intelligence said.  

Storm Boris brought a period of almost continuous rainfall over much of the Czech Republic, Austria, southwest Poland and eastern Slovakia over Sept. 12-15, leaving large areas submerged. Governments across the region took emergency measures and prepared to spend hundreds of millions of euros on the cleanup. Water levels remain elevated. 

Since floodwaters have yet to peak, it will be some time before there is a firm figure on the size of the loss, Graham said.