LONDON--(BUSINESS WIRE)--A.M. Best Co. has been analysing the impact of the heavy rain and subsequent flooding throughout Central Europe. The downpours at the beginning of June, which followed persistent rains throughout May, have resulted in severe flooding and the bursting of rivers including the Danube, Elbe, Rhine, Main, Vltava, and Neckar.
In a new Best’s Briefing titled, “Early Flooding Analysis Shows European Insurers Well Positioned”, A.M. Best states that the final loss that the insurance industry will face currently remains unclear given the situation is still developing in the Czech Republic, Germany, Austria, Poland, Hungary, Slovakia and Switzerland. Many towns remain submerged, and water must recede before loss adjusters are able to determine the full extent of the damages. However, based on the coverage dynamics in these markets, A.M. Best expects economic losses will far exceed insured losses.
This briefing is the result of various discussions that A.M. Best has held with market participants in the affected region over the past fortnight. A.M. Best has visited and interviewed a range of industry figures with involvement in the countries impacted by the recent flooding.
The recent flooding is the worst to hit Central Europe since 2002, which resulted in economic damages of EUR 17 billion and estimated insured losses of EUR 3.4 billion. However, in the past decade, flood protection has improved and insurers have introduced higher deductibles or withdrawn cover in loss-prone areas. Compared to the floods of 2002, to date fewer major economic centres and municipal towns have been flooded. Rural areas have tended to be the most severely impacted, and underinsurance is common in the affected towns. In Eastern Europe, many residential property owners are uninsured.
For A.M. Best’s rated insurers and reinsurers, the recent floods are expected to be an earnings event rather than a hit to capital. Stefan Holzberger, managing director, analytics, said: “The first five months of 2013 have been benign for natural catastrophes and large losses, and as a result, the flood losses are well within most companies’ cat loss budgets for 2013.”
The briefing also considers industry and governmental responses to the flooding. Yvette Essen, director, industry research - Europe and emerging markets, and report author, added: “Rate rises and higher deductibles are anticipated for flood cover, and possibly also for the non-flood components of retail and commercial property policies. Flooded regions may also be reassessed and flood zones remapped.” Central European governments are likely to come under increasing pressure to protect citizens against further floods. In addition to increasing spending on flood prevention infrastructure, governments may explore the creation of flood insurance pools or make flood insurance compulsory in flood-prone territories.
To access a complimentary copy of this briefing, please visit www.ambest.com/press/061701centraleuropefloods.pdf.
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