German insured flood losses estimated up to US $3.2bn: Moody’s RMS

According to Moody’s RMS Event Response, insurance and potentially reinsurance market losses in Germany from recent Central European floods of May 30th to June 3rd are expected to be between US $2.1 billion and US$3.2 billion.

It’s a higher figure than the German Insurance Association (GDV) had given a week ago, after it said the flooding in areas of Bavaria and Baden-Württemberg in Germany was expected to drive insurance market losses in the region of €2 billion (US $2.15bn).

The Moody’s RMS estimate is based on output from its Europe Inland Flood HD Models and include impacts from insured property damage, spoiled contents, and business interruption across residential, commercial, industrial, agricultural property, and automobile lines of insurance.

In addition, post-event loss amplification (PLA), recent inflationary trends, exposure growth, and increases in insurance take-up are also included.

Moodya’s RMS estimate for the floods is focused on insured losses for southern Germany so does not include losses from flooding in Switzerland, Austria, Czechia, Hungary, and Italy, which are all expected to be more minimal.

Daniel Bernet, Assistant Director, Model Product Management, Moody’s said, “This event has much in common with the central European floods of 2013, and not just because it fell on the same days in the year. May 2024 was among the wettest months recorded in southern Germany. Soils were fully saturated after the initial heavy rainfall on May 28 and May 30, the more prolonged rainfall associated with a typical Vb-type event then led to widespread flooding in southern Germany.

“Even the insured losses from 2013 and the current events are in the same range when trending the 2013 losses to today. In Baden-Württemberg, given the flood insurance take-up rate is as high as 94 percent, most of the residential losses will be covered. Unfortunately, this high level of coverage is not the case in Bavaria where the flood insurance take-up rate is 47 percent.

“Similarly, properties will not be covered for direct ground-water intrusions, a frequently observed phenomenon during the 2013 event. From a flood modeling perspective, the 2013 and 2024 events again highlight how important it is to appropriately capture key elements such as antecedent conditions, Vb-type events, cross-country correlations, flood defenses, and combined fluvial and pluvial flooding.”

Even at the upper-end of the estimated range, of around the US $3.2 billion mark, the insured losses from these floods in Germany should be largely retained by the primary insurance market, with reinsurance capital only supporting a relatively small amount and largely through quota share arrangements.

Whether the losses could creep higher, as was seen in other recent severe flood years in Germany, remains to be seen. If they do, that could bring into question whether some capital market structures such as reinsurance sidecars could take a share, we suspect.