Insurers could see limited impact from CE floods on P&C 2024 underwriting results: S&P

The impact of the floods resulting from Storm Boris in Central Europe on rated insurers’ property and casualty (P&C) underwriting performance will be manageable, S&P analysts expect.

A slow-moving storm caused days of intense rainfall and severe flooding across Czechia, Poland, Austria, and Romania over the second week of September.

Given the large size of the damaged areas, the economic costs of the flood will be high. As a result, P&C insurers operating in Czechia, Poland, and Austria are likely to report sizable losses from the event, known as Storm Boris, according to analysts.

This is due to the high prevalence of flood insurance in these countries. However, the exact extent of the losses remains uncertain at this time as the situation is still developing.

S&P believes that Czechia, Poland, and Austria are better prepared for such a natural catastrophe than in 2013 or 2010, when they also experienced massive floods, given improvements to flood protection and prevention measures over the last decade.

Current reported loss estimates suggest aggregated insured losses of up to about €2.2 billion across Czechia, Poland, Austria, and Romania.

S&P Global Ratings’ base case currently assumes that insured losses will be at the lower end of the €2 billion to €3 billion range indicated by reinsurance broker Gallagher Re.

The agency’s base case does not include any additional flood losses which may occur as the flood wave travels along Rivers Danube and Oder over the next several days.

Other estimates include Guy Carpenter’s, who predicts an insured loss between €1.6 billion and €2.1 billion from the event.

According to Aon, the severe flooding that impacted Central Europe is predicted to become one of the costliest events on record for the region, with billions of EUR in total losses.

S&P expects the main insured losses from the event to come from Czechia, Poland, and Austria. These countries have high insurance penetration, in an EU context, compared to Romania, which also experienced significant flooding but has low insurance penetration.

According to the first estimates of the Czech Insurance Association (CAP), the insured losses in Czechia will reach about 17 billion Czech koruna (about €680 million).

Regions in south-west Poland (Lower Silesia and Opole County), which neighbour Czechia, were also heavily hit by the floods. Analysts expect that Polish insurers will have to deal with material insured losses, which could be in a similar range to those in Czechia.

In Austria, insured losses could reach €600 million to €700 million, according to the Austrian insurance association (VVO).

Despite the negative effects caused by Storm Boris, S&P expects the impact of the floods on rated Insurers’ P&C underwriting performance to be manageable.

That group of rated insurers includes: Vienna Insurance Group AG (VIG) (A+/Stable/–); UNIQA Insurance Group AG, core operating entities (A/Stable/–); Powszechny Zaklad Ubezpieczen S.A. (PZU) (A-/Positive/–); Towarzystwo Ubezpieczen i Reasekuracji WARTA S.A. (A+/Stable/–), part of Talanx Primary Insurance Group (A+/Stable/–).

As well as: HDI Versicherung AG (Austria)(A/Stable/–), part of Talanx Primary Insurance Group (A+/Stable/–); and Allianz Elementar Versicherungs – AG (AA/Stable/–), part of Allianz SE (AA/Stable/A-1+).

S&P stated: “While we believe rated insurers could see some limited impact from the floods on their P&C underwriting results in 2024, we expect that reinsurance protection, strong overall earnings in the first six months of 2024, diversified earnings streams from life and health insurance, and sound capital buffers both under Solvency II and the S&P Global Ratings’ capital model are strongly supportive factors and a financial buffer against the natural catastrophe claims.

“Moreover, all the insurance groups have very strongly profitable non-life business, with non-life combined ratios in the low to mid 90% range (a ratio under 100% indicates an underwriting profit).”

In addition to their non-life insurance operations, the insurers also gain from diversification into life and health insurance, which are projected to maintain strong profitability and positively impact 2024 results.

Moreover, investment results continue to demonstrate stability and growth, S&P noted. The agency anticipates that insurers’ capital positions will maintain their resilience, and at least at the ‘99.95%’ level in S&P’s capital model, and their Solvency II ratios will also hold firm.

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