The financial strength of Central European insurers will remain strong despite severe flooding

Guy Carpenter said the impact of flooding in the region demonstrated its progress in preparedness, as rainfall exceeded a 100-year return period but resulted in losses of 25-65 years for insurers in the Czech Republic, Poland and Austria.

The floods have caused at least 24 deaths in the worst-hit countries, Gallagher Re said in its commentary on the floods.

For now, S&P said, the main insured losses from the event came from the Czech Republic, Poland and Austria. Although there has also been significant flooding in Romania, S&P does not expect material insured losses in that country due to low insurance penetration.

“Unsurprisingly, given the size of the affected areas, the economic costs of the flood will be high,” S&P Global Ratings analyst Jure Kimovec said in a statement accompanying the report. “As flood risk is commonly insured in the Czech Republic, Poland and Austria, we believe property and casualty insurers operating in these countries are likely to report significant natural catastrophe losses following the event.”

Negative, but manageable

S&P said the group of insurers it rates in the region are likely to see negative but manageable impacts from the floods. These insurers are: Vienna Insurance Group AG, UNIQA Insurance Group AG; Powszechny Zaklad Ubezpieczen SA (PZU); Towarzystwo Ubezpieczen i Reasekuracji WARTA SA (part of the Talanx Primary Insurance Group); HDI Versicherung AG (part of Talanx); and Allianz Elementar Versicherungs AG (part of Allianz SE).

“We do not expect the demands resulting from the floods to result in liquidity constraints for the rated groups,” the rating agency noted.

“While we believe rated insurers may see limited flood impact on P&C underwriting results in 2024, we expect reinsurance protection, strong global earnings in the first six months of 2024, diversified life earnings streams and health and solids. capital buffers, both under the Solvency II capital model and S&P Global Ratings, are strong support factors and a financial buffer against natural catastrophe claims.”

At the same time, S&P continued, all of these insurance groups have very profitable non-life businesses, with combined non-life rates in the low to mid-90% range. (A combined ratio below 100 indicates an underwriting profit).

S&P also expects insurers’ capital positions to remain resilient and Solvency II ratios to remain robust.

The rating agency suggested there could be an effect on the availability and cost of reinsurance protection for affected insurance groups given the scale of the flood event, “particularly given the still favorable market conditions for reinsurers”.

Benefits of flood protection

Despite the severity of the damage, S&P suggested that the Czech Republic, Poland and Austria are better prepared for such a natural catastrophe than they were during previous events in 2013 or 2010, “given improvements in flood protection and prevention measures in the last decade. .”

“Improved warnings, along with recent increased investment in flood defenses have been instrumental in mitigating losses,” said Gallagher Re.

Guy Carpenter said the impact of flooding in the region demonstrated its progress in preparedness, as rainfall exceeded a 100-year return period but resulted in losses of 25-65 years for insurers in the Czech Republic, Poland and Austria.

“Unlike the devastating floods of 1997, 2001, 2002 and 2010, the impact of the 2024 floods has been significantly mitigated by modern infrastructure, levees and flood barriers,” said Guy Carpenter.

“This reduction in losses is largely due to improved flood risk management and increased public awareness in the region. Investments in flood defenses and timely preventive measures, such as proactive predictive management of reservoirs and reinforced levees, together with more accurate early warning systems, have played a key role in minimizing the financial impact and protecting major urban centres.” Carpenter added.

Howden Re also highlighted the significant investment made by a number of Central European countries in flood defenses since 2002, which had “a major impact in ameliorating the consequences of this extreme event”.

Insured losses per country

S&P went on to discuss insured losses from recent floods on individual countries in the region.

• Czech Republic. Insured losses in the Czech Republic will reach about 17 billion Czech crowns (about $757.6 billion), S&P said, citing early estimates from the Czech Insurance Association (CAP). Losses are expected to be split equally between households and commercial entities, S&P said, noting that at this level of expected insured loss, the 2024 floods would likely surpass insured losses from the 2013 Czech Republic floods and become the second the most expensive nation. natural disaster behind the 2002 floods.
• Poland. The regions of southwestern Poland (Lower Silesia and Opole County), bordering the Czech Republic, were also heavily affected by the floods. As a result, S&P expects Polish insurers to face material insured losses, which could be in a similar range to those in the Czech Republic.
• Austria. In Austria, insured losses are also expected to be historically significant, with insured losses reaching around €600 million to €700 million ($668.4 million to $780 million), S&P said, citing the Austrian Insurance Association (VVO). This level of damage would make the floods the largest natural catastrophe event ever insured in Austria.
• Romania. Although there have also been significant floods in Romania, S&P does not expect material insured losses due to relatively low flood insurance penetration, meaning most of the nation’s economic losses are uninsured.

Photo: A view of a damaged house after recent flooding near Pisecna, Czech Republic, Thursday, Sept. 19, 2024. (AP Photo/Petr David Josek)

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Carriers flood Europe