European Floods Threaten Insurers With Worst Losses in Decades

Central and Eastern Europe have been reeling from a series of devastating floods that have left insurers facing some of the most significant losses in decades. The situation has seen Polish armed forces and workers tirelessly removing debris from flood-ravaged towns, with the impact of the floods being felt across multiple countries in the region. Insurers such as Powszechny Zaklad Ubezpieczen SA, Vienna Insurance Group AG, and UNIQA Insurance Group AG are bracing for substantial financial hits, with estimated insured losses ranging between €2 billion to €3 billion. This figure is reminiscent of the catastrophic floods that occurred in 1997, 2002, and 2013, highlighting the recurring nature of such natural disasters in this part of Europe.

The data from Bloomberg Intelligence underscores the magnitude of the impact on the insurance industry. Other major insurers, including Generali and Allianz SE, also have significant exposure to these flood losses. The Bloomberg Terminal, a tool providing further information and analysis, has been instrumental in tracking the developments and offering insights into the financial ramifications. The floods have affected several countries in the region, each grappling with the challenges of handling a deluge of claims. The sheer volume of these claims poses a daunting task for insurers, testing their financial stability and operational resilience.

The potential impact of these claims on insurers’ financial stability cannot be understated. The companies are working diligently to assess the damages and provide assistance to the affected areas. Central and Eastern European countries are particularly vulnerable to natural disasters, with their infrastructure often unable to withstand the full force of such events. The widespread destruction and damage caused by the floods have led to some of the largest losses insurers in the region have faced in recent memory. The ripple effects are being felt not just by insurance companies but also by other businesses and communities that have been caught in the floods’ wake.

Storm Boris, which recently swept through Central Europe, is another example of the severe weather events contributing to the mounting losses. Guy Carpenter, a risk and insurance firm, has projected the losses from Storm Boris to be between €1.6 billion and €2.1 billion. While these figures are lower than those from previous storms due to improved flood management, they still represent a significant financial burden. The estimates remain preliminary and could change as more information becomes available. Enhanced flood defenses have played a crucial role in mitigating some of the damage, but the economic costs are still substantial.

Storm Boris brought intense rainfall and flooding to Czechia, Poland, Austria, and Romania, causing widespread damage. The economic costs are expected to be high due to the large areas affected. Property and casualty (P&C) insurers in these countries are likely to report significant losses given the high prevalence of flood insurance. However, the exact extent of the losses remains uncertain. Compared to previous floods in 2013 and 2010, these countries are better prepared thanks to improvements in flood protection and prevention measures. Initial loss estimates suggest insured losses of up to €2.2 billion in the hardest-hit regions.

S&P analysts have weighed in on the situation, predicting that the impact of Storm Boris will be manageable for rated insurers. This group includes companies like Vienna Insurance Group, Uniqa Insurance Group, Powszechny Zaklad Ubezpieczen, and Warta Group. Despite the negative effects of the flood, these insurers are expected to maintain strong earnings from life and health insurance and sound capital buffers. Their capital positions and solvency ratios are anticipated to remain resilient, with non-life business profitability also holding steady. S&P’s base case assumption is that insured losses will be at the lower end of the €2 billion to €3 billion range.

Guy Carpenter’s initial assessments of the September 2024 floods estimate financial losses between €1.6 billion and €2.1 billion. While the floods caused significant damage, the losses were lower than previous catastrophic events like the floods of 1997 and 2002. This reduction in financial impact is attributed to advancements in flood risk management, including improved infrastructure, enhanced early warning systems, and greater public awareness. The flood event, beginning on September 11, 2024, affected large areas of Austria, the Czech Republic, Hungary, Romania, and Slovakia, with Storm Boris bringing heavy rain and high winds that forced thousands to evacuate.

Tragically, the floods claimed lives, with eight people drowning in Austria, Poland, and Romania, and four others still missing in the Czech Republic. Guy Carpenter highlights that preemptive actions, such as reservoir management and reinforced levees, played a key role in mitigating the damage. The analysis suggests that global warming could increase the frequency and intensity of extreme rainfall events, raising concerns about future flash floods. Factors like land use changes, urbanization, and exposure growth are likely to influence future flood losses, making it imperative for continued advancements in flood risk management.

Hydrometeorological conditions during the floods were marked by large-scale circulation patterns and prolonged rainfall, which, combined with local terrain, played a critical role in the extent of the flooding. Despite the intensity of the floods, early preventive measures helped protect major cities. Compared to the devastating floods of 1997, modern infrastructure and early preparedness significantly reduced the impact of the 2024 floods, according to Guy Carpenter’s analysis. In the Czech Republic, reservoirs along the Vltava River were strategically drained to increase their capacity to handle floodwaters, while in Poland, the newly launched Racibórz Dolny reservoir helped protect cities like Wrocław and Opole.

Preliminary loss estimates at a country level by Guy Carpenter suggest that Austria may see losses between €550 million and €650 million, the Czech Republic between €600 million and €750 million, and Poland between €350 million and €550 million. Slovakia, Hungary, and Romania are expected to face combined losses between €100 million and €150 million. While the nominal value of these losses may surpass figures from 1997 due to inflation, the real impact remains lower. In comparison, approximately 20% fewer properties were affected in 2024 compared to 1997, and the financial damage is expected to be less than that of the 2010 floods.

However, these are preliminary estimates, and the actual losses may differ as more data becomes available. Guy Carpenter will continue to monitor the situation and provide updates as needed. Overall, the estimated market losses from the September 2024 floods in Central and Eastern Europe are significant but lower than previous catastrophic events, thanks to advancements in flood risk management and early preventive measures. The insurance industry, while facing a substantial financial burden, has shown resilience and adaptability in the face of these challenges.

The role of the insurance industry in recovery and rebuilding efforts cannot be overstated. Insurers are pivotal in helping those affected by the floods, providing the necessary funds for repairs and reconstruction. The estimated losses are a significant financial burden, but the true extent of the damage and losses is yet to be fully determined. As the focus shifts to recovery and rebuilding, the importance of continued investment in flood defenses and risk management becomes even more apparent. The lessons learned from these floods will undoubtedly shape future strategies and policies aimed at mitigating the impact of such natural disasters.

In conclusion, the recent floods in Central and Eastern Europe have highlighted the vulnerability of the region to natural disasters and the significant financial implications for the insurance industry. While advancements in flood risk management have helped mitigate some of the damage, the economic costs remain substantial. Insurers are facing some of the largest losses in decades, with the estimated insured losses ranging between €2 billion to €3 billion. The situation underscores the need for continued investment in infrastructure, early warning systems, and public awareness to better prepare for and respond to future flood events. The resilience and adaptability of the insurance industry will be crucial in navigating the challenges ahead and supporting the affected communities in their recovery efforts.