LONDON--(BUSINESS WIRE)--The first-half 2016 earnings of French and German insurers will be dampened by flood losses following storms Elvira and Friederike, which hit the countries in quick succession between late May and early June. However, A.M. Best does not anticipate any negative rating actions on the insurers it rates as the flood events are not likely to drive a material deterioration in full-year 2016 performance or affect capitalisation.
In a new Best’s Briefing, titled, "French and German Floods to Dampen Insurers’ H1 2016 Earnings; Negative Rating Actions not Anticipated," A.M. Best notes that insured losses from the floods are estimated at between EUR 0.9 billion and EUR 1.4 billion for the French market and around EUR 1.2 billion for German insurers. The disparity between economic and insured losses will be greater in Germany than in France, owing to lower levels of flood insurance penetration.
Alex Rafferty, financial analyst and contributor to the briefing, said: "The market is expecting some 150,000 claims, with the large personal lines insurers providing property and motor insurance most affected. Caisse Centrale de Réassurance (CCR) expects the recent floods to be the largest insured natural catastrophe loss incurred since 1982, with the state-backed reinsurer taking a significant share of the total market loss."
With no government-backed or formalised natural catastrophe scheme in place in Germany, coverage for flood may be added as a policy extension, though this additional protection often results in a notable increase in premium, particularly for risks domiciled in flood prone areas of the country. Consequently, the average penetration rate for flood protection is relatively low. Myles Gould, senior financial analyst and co-contributor to the briefing, added: "Economic and insured loss estimates are currently difficult to fully predict, given that residual waters have yet to disperse in some of the most severely hit parts of country. However, the localised nature of the flooding in Germany means that small regional insurers are likely to be disproportionately affected. A.M. Best notes that for most insurers with exposure to the German floods, losses are unlikely to be sufficiently high to hit their catastrophe excess of loss programmes, although for those with proportional reinsurance coverage, some of the losses will be passed to reinsurers."
To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=250475.
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