Steve Evans, Artemis, vom 18. Februar 2020

Recent European windstorms and resulting flooding pose an increasing threat to certain layers of UK and European reinsurance programs, as loss estimates begin to suggest multi-billion Euro industry impacts in the last fortnight.

storm-wind-wavesStorm Ciara, also known as storm Sabine and storm Elsa across the continent, struck Ireland, the United Kingdom, Germany and other parts of northern Europe from February 8th through 11th.

Already estimates from catastrophe risk modellers suggest a multi-billion Euro loss to the insurance and reinsurance industry from this one storm.

First to provide any insight into the extent of insurance and reinsurance market losses from storm Ciara or Sabine / Elsa was actuarial firm Meyerthole Siems Kohlruss (MSK), who told us they expect the eventual property insurance market loss from windstorm Sabine’s impacts in Germany will be around EUR 600 million.

MSK also explained to us that Sabine is expected to drive roughly EUR 70 million of property insured damages in Austria and another EUR 60 million in Switzerland.

For Victoria (storm Dennis), MSK believes that German insurers will only face around EUR 100 million of losses.

AIR Worldwide was the first modeller with an estimate, saying that storm Ciara, or storm Sabine as it was named in Germany, would result in an insurance or reinsurance industry loss of between EUR 1.1 billion and EUR 1.9 billion, the top-end of which is almost US $2.1 billion.

Then, RMS said insurance and reinsurance industry losses from recent European windstorm Ciara – Sabine could reach as high as EUR 1.8 billion (around US$2bn).

Now, the German Insurance Industry Association the GDV has said that storm Sabine in Germany is likely to result in a EUR 675 million industry loss, if factoring in both property damage of EUR 600 million and auto insurance losses estimated at EUR 75 million.

On that basis, the GDV puts Sabine as the sixth most damaging winter storm in Germany since 2002.

The estimates from AIR and RMS are both only based on wind damage to property, so don’t include flooding impacts, suggesting their industry estimates will fall below where the actual industry toll eventually settles.

Following quickly on the heels of storm Ciara / Sabine was another European winter windstorm that was named storm Dennis in the United Kingdom and storm Victoria in Germany.

Windstorm Dennis / Victoria struck parts of western and central Europe on February 15th and 16th, with the United Kingdom again particularly impacted by both wind and flooding, while Europe also experienced high winds leading to property damage.

Coming so soon after storm Ciara / Sabine / Elsa, impacts from storm Dennis / Victoria exacerbated damages and added to rainfall totals and flood levels, which is likely to lead to challenges for loss assessors and insurers.

Media reports from Germany suggest that the impacts of storm Victoria, as Dennis is known there, will be less costly than Sabine the week before.

But in the UK, the flooding related impacts of storm Dennis are ongoing and there is an expectation that the costs of the storm could end up relatively comparable to Ciara the week prior, albeit perhaps more weighted towards the flood event.

The fact risk modelling companies do not provide full estimates across all perils for these storms makes it challenging for the industry to gain a rapid understanding of how impactful they could be.

But industry sources are already talking about the potential for the aggregation of losses across the two weekends of storms to cause some level of impact to exposed reinsurance treaties.

Major UK insurers such as RSA and Aviva are particularly in focus here, as both have well-established per-occurrence and aggregate reinsurance in place to cover both major loss events and more frequent smaller losses.

RSA has a three-year aggregate reinsurance treaty it renewed in 2018 to cover it from more frequent larger losses. But the insurer also has other aggregate treaties in place from 2019, which were designed to limit the net impact of smaller catastrophe and severe weather events as well.

RSA also looked to reduce its retention in certain areas of its reinsurance program last year, while restructuring its regional protection to reduce volatility of claims between £1 million and £10 million.

All of which suggests that its reinsurance program may now be more responsive to the kinds of winter European storm and flood losses seen over the last two weeks.

Aviva meanwhile also has aggregate reinsurance as well as per-occurrence. The aggregate reinsurance attaches after qualifying losses reach £175 million, so if nothing else it is expected that these storms will drive some deductible erosion.

Aviva’s per-occurrence catastrophe reinsurance cover attaches at £150 million and it’s not out of the question that the insurers losses from these windstorms and the related flooding could reach that high.

The flooding component of these recent storms could also result in some losses ultimately being paid by the UK’s Flood Re as well, should the eventual toll prove significant enough.

At this stage it’s not clear whether there is any collateralised or ILS fund capacity exposed to these storm events. But past UK storm losses have resulted in some attritional losses for ILS funds, suggesting there is a chance of some capital market participation on certain exposed reinsurance layers.

For European reinsurers the aggregated losses from these two storm systems alone won’t trouble them, but taking the entire winter windstorm season into account some impacts may be felt.