Verisk Estimates Industry Insured Losses from Flooding in Southern Germany to Range from EUR 2.4 Billion to EUR 3.6 Billion (USD 2.6 Billion to USD 3.9 Billion)

Rhea-AI Summary

The Extreme Event Solutions business unit of Verisk (Nasdaq: VRSK) estimates insured losses from flooding in Southern Germany between May 15 and June 5 to be between EUR 2.4 billion (USD 2.6 billion) and EUR 3.6 billion (USD 3.9 billion). The flooding, caused by excessive rainfall, severely impacted Bavaria and Baden-Württemberg, submerging streets, homes, and businesses. Notably, nearly half of all structures in Bavaria and over 90% in Baden-Württemberg are insured for flood damage. The loss estimate includes insured physical damage to residential, commercial, industrial, auto, and agricultural properties, as well as additional living expenses and business interruption claims.

Positive

• High insurance uptake in Bavaria (nearly 50%) and Baden-Württemberg (over 90%) mitigates financial impact on affected residents.
• Verisk provides a comprehensive estimate including residential, commercial, industrial, auto, and agricultural damage.

Negative

• Estimated insured losses from the flooding range between EUR 2.4 billion and EUR 3.6 billion.
• Significant flooding occurred in key regions, submerging homes, businesses, and large tracts of farmland.

Insights

Financial Analyst

The estimated loss range of EUR 2.4 billion to EUR 3.6 billion (USD 2.6 billion to USD 3.9 billion) is significant. Investors should be aware that such a large-scale event can impact insurance companies' profit margins due to the high payout requirements. While the financial strain is evident, the fact that a high proportion of the overall losses are likely to be insured is noteworthy. This implies substantial claims but also reflects the region's preparedness and the insurers' previous risk assessments. This event may temporarily suppress earnings for insurers operating heavily in these areas, but it also underscores the importance of their services. Long-term, this can lead to stricter underwriting standards, higher premiums, or policy adjustments for flood insurance. Additionally, companies like Verisk that provide data analytics for these predictions may see increased demand for their services as insurers look to refine risk management. Retail investors should consider the short-term financial hit against the potential long-term adjustments insurers will make to mitigate future risks, which might eventually lead to better financial stability. In summary, while this event creates immediate financial pressure, it also validates insurance’s critical role and may encourage more precise risk pricing and management in the future.

Market Research Analyst

Given that nearly half of all structures in Bavaria and over 90% in Baden-Württemberg are insured for flood, the high insurance penetration in these regions is a double-edged sword. On one hand, it means a significant portion of the financial burden will be borne by insurance companies, likely triggering a wave of claims and potential cash outflows. On the other hand, such events highlight the importance and value of having insurance coverage, which can drive higher insurance uptake in less covered regions. For Verisk, their accurate and prompt loss estimation boosts their credibility and may attract more clients seeking robust risk assessment tools. This can potentially lead to increased revenue from their Extreme Event Solutions unit. Market trends may also see an uptick in technology and data analytics firms focusing on improving predictive models for natural disasters, reflecting a broader shift towards proactive risk management in the insurance sector. Retail investors should monitor how insurance stocks react in the wake of this event and consider the long-term growth potential for firms specializing in disaster analytics and risk management. The short-term downside from claims could be offset by long-term gains from improved market positioning and product offerings.

A relatively high proportion of the overall losses for this event are likely to be insured, owing to the high insurance take up for the flood peril

BOSTON, June 19, 2024 (GLOBE NEWSWIRE) -- The Extreme Event Solutions business unit of Verisk (Nasdaq: VRSK), a leading global data analytics and technology provider, estimates industry insured losses from flooding in Southern Germany from May 15 to June 5 will range from EUR 2.4 billion (USD 2.6 billion) to EUR 3.6 billion (USD 3.9 billion).

Between Friday, May 31 at noon CET and Monday, June 3 at noon CET, 120 to 160 liters of rain fell per square meter across southern Germany, which is more than what usually falls in a month, according to Sebastian Altnau, a meteorologist with the German Weather Office.

The main flooding occurred along parts of the upper Danube River, as well as several of the Danube's southern tributaries, with the worst impacts in Germany in Bavaria and Baden-Württemberg. Flooding submerged streets, highways, homes, and businesses. A dam on the Paar River broke in two places in the Bavarian district of Pfaffenhofen an der Ilm, severely flooding surrounding areas and requiring hundreds to evacuate their homes in nearby Baar-Ebenhausen. A dyke and a dam also broke in Diedorf.

Elsewhere in Bavaria, the Schmutter, Cham, Paar, Ilm, Danube and Isar Rivers all reached above the level 4 (highest) warning levels in several locations. In Baden-Württemberg, homes and businesses were also flooded, and an estimated 95,000 hectares of farmland were inundated.

According to the German Insurance Association (GDV), nearly half of all structures in Bavaria are insured for flood, while in Baden-Württemberg that figure exceeds 90 percent, as flood protection was a compulsory part of property insurance in that state until 1994.

Included in the industry insured loss estimate is insured physical damage to property (residential, commercial, industrial, auto, agriculture), both structures and their contents, from both on- and off-floodplain flooding. Also included are additional living expenses (ALE) for residential claims and business interruption (BI) for commercial claims.

Verisk’s loss estimates do not include:

• Losses outside of Germany
• Losses to uninsured properties
• Losses to infrastructure
• Losses from extra-contractual obligations
• Losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event
• Demand surge
• Other non-modeled losses

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About Verisk 
Verisk (Nasdaq: VRSK) is a leading strategic data analytics and technology partner to the global insurance industry. It empowers clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, ESG and political issues. Through advanced data analytics, software, scientific research and deep industry knowledge, Verisk helps build global resilience for individuals, communities and businesses. With teams across more than 20 countries, Verisk consistently earns certification by Great Place to Work and fosters an inclusive culture where all team members feel they belong. For more, visit Verisk.com and the Verisk Newsroom. 

Contacts: 
Mary Keller 
Verisk 
339-832-7048
mary.keller@verisk.com 

FAQ

What are the estimated insured losses from flooding in Southern Germany as reported by Verisk (VRSK)?

Verisk estimates the insured losses from flooding in Southern Germany to range between EUR 2.4 billion (USD 2.6 billion) and EUR 3.6 billion (USD 3.9 billion).

When did the flooding in Southern Germany occur according to Verisk (VRSK)?

The flooding occurred between May 15 and June 5, with particularly heavy rain from May 31 to June 3.

Which areas in Southern Germany were most affected by the flooding as per Verisk (VRSK)?

The most affected areas were parts of the upper Danube River, and its southern tributaries, with severe impacts in Bavaria and Baden-Württemberg.

How does the insurance coverage in Bavaria and Baden-Württemberg compare according to Verisk (VRSK)?

Nearly half of all structures in Bavaria are insured for flood, while in Baden-Württemberg, the figure exceeds 90%.

What types of damages are included in Verisk's (VRSK) insured loss estimates for the Southern Germany flooding?

The estimate includes insured physical damage to residential, commercial, industrial, auto, and agricultural properties, as well as additional living expenses for residential claims and business interruption claims for commercial properties.