Goldman Sachs analysts suggest Generali could make reinsurance recovery on Storm Boris impacts

With Generali’s European flood per event reinsurance coverage kicking in after a €300 million attachment, the insurer could make a reinsurance recovery on Storm Boris as analysts at Goldman Sachs forecast losses for the firm to be between €300 and €425 million.

Storm Boris impacted Central Eastern European (CEE) countries, as well as Austria and Italy mainly from September 12-15, causing severe and costly flooding, particularly affecting Poland, the Czech Republic, Slovakia, Austria, Hungary, Slovenia, and Romania.

The floods have resulted in at least 24 fatalities and caused severe damage to residential and commercial properties, vehicles, infrastructure, and agribusiness operations.

Gallagher Re has estimated an insured CEE industry loss of €2 to €3 billion ($2.2 to $3.3 billion).

Taking the industry loss estimates and applying Generali’s 12.4% CEE market share, Goldman Sachs estimates the insurer’s CEE plus Austria loss at €250-€375 million.

Looking specifically at Austria, the Austrian Association of Insurers estimates industry losses of €600-€700 million, which based on Generali’s 14.3% market share implies €85-€100 million of losses, which results in a €165-€275mn loss for the rest of the CEE region, according to Goldman Sachs’ analysts.

Industry loss estimates are not yet available for Italy, but analysts noted that the April 2023 floods saw a loss of €110 million, net of reinsurance, for Generali.

The Storm Boris flooding is considered a smaller event and is less concentrated in industrial/manufacturing areas, Goldman Sachs stated, therefore forecasting a loss of €50 million.

“On a gross basis, we estimate Storm Boris losses of €300-€425 million but Generali’s European flood per event reinsurance protection has a €300 million attachment point. We believe that the CEE and Italy floods are considered the same as both derive from Storm Boris so therefore our net loss estimate is €300 million,” say analysts.

Year-to-date (YTD) nat cat losses are estimated at €730 million, according to analysts, who explained: “Generali’s incurred Nat-Cat losses were €278 million in 1H24, and the company indicated at its 1H’24 analyst call that it had another €100 million of net losses in July.”

“Assuming a €300 million Storm Boris loss and another €50 million from other Q3 losses (where there has been no other major events) suggests a YTD nat cat loss of €728mn,” continue analysts.

“The company guided nat cat budget is 2.7% of premium, implying €870-€880 million of losses for FY’24. Visible Alpha consensus is currently at €820 million for FY’24 nat cat losses and we note that Q4 is typically the second lowest loss quarter (behind Q1). Based on our YTD loss estimates this would leave €90 million of nat cat budget for Q4 on consensus estimates,” Goldman Sachs concluded.

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