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AIIR Worldwide : estimates insured losses in Germany from historic floods at between 4 and 5.8 billion Euros

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Catastrophe modeling firm AIR Worldwide estimates insured losses in Germany from the recent floods in central Europe at between EUR 4.0 billion and EUR 5.8 billion. The overall economic impact is expected to be much higher. While the worst damage has already occurred, this flood event is ongoing.

“An extraordinarily wet May and several days of heavy and relentless rainfall in June have resulted in the worst flooding to hit parts of central Europe in many years,” said Yorn Tatge, managing director of AIR Worldwide GmbH. “Germany, Austria, and the Czech Republic have suffered the brunt of the flooding, the worst since the Elbe flood of 2002, but Switzerland, Hungary, Slovakia, and Poland have also been affected.”

In comparison, AIR estimates that the 2002 Elbe floods, which affected a smaller area, would cause approximately EUR 5.0 billion in insured losses or more were it to recur today, after accounting for changes in the penetration of flood coverage and the growth in building stock and values.

Tatge continued, “Floodwaters hit Germany hardest, particularly the east and south German states of Thuringia, Saxony, Saxony-Anhalt, Lower-Saxony, and Bavaria. Several levees along the Elbe River near Magdeburg, the capital of Saxony-Anhalt state, were breached or in danger of a breach as flood water rose more than 16 feet above normal. In Passau, located at the intersection of the Danube, Inn, and Ilz rivers, floodwaters hit their highest level since 1501, while the Saale River in Halle, Germany, reached its highest level in its 400 years of record keeping.”

Over the course of two days (May 30-June 1), portions of Austria received the equivalent of two and a half months of rainfall (150 to 200 mm). Isolated regions experienced 250 mm. The rising Danube River threatened the cities of Linz and Melk, and flood alerts were issued for the western provinces of Vorarlberg, Tyrol, and Salzburg, as well as northern parts of Upper Austria. Flooding in Tyrol and Styria is considered the worst in the area since 2002.

In the Czech Republic flood warnings were put in place for 40 cities, including the capital, Prague. A state of emergency was also in effect in Prague, as well as other areas including South and Central Bohemia, Plzen, Liberec, Hradec Kralove, and Usti.

Budapest, the capital and largest city in Hungary, is expected to see record flood levels but should not receive significant damage.

Meteorological Background

According to AIR, the heavy, persistent rains were the result of a low pressure system called a Genoa Low Cyclogenesis, which developed over the eastern Adriatic Sea. From there it moved northwards towards the Eastern Alps, bringing with it warm, moist air from the Black Sea. As this warm air mass collided with the colder air masses over northern Europe, it was lifted up and rain clouds developed. The system, named Frederik, remained over Central Europe for several days due to a very stable track, but has now moved on towards southeast Europe.

The event has released an enormous amount of precipitation-in some areas as much as 400 liters per square meter within a few days. In Aschau-Stein, more than 405 liters per square meter of precipitation fell within 90 hours. Over a nine-day period from May 29 to June 6 more than 300 mm of rain fell on some areas. In Germany, more than 60 river gauges were reported to be in their highest flood-warning zones. River gauges along the Danube, where the water level reached 12 m, were rendered inoperable. Several tributaries rose above the 100-year water level.

Exposure at Risk and Insurance Penetration

According to AIR, the predominant construction type for single family homes in Europe is masonry and around 90% of the homes in the countries affected by this event are of masonry construction, with the remainder usually being wood; a few are reinforced concrete. As most of the homes are one-story buildings, floods can damage a significant percentage of the buildings and their contents. The presence of a cellar increases the risk for contents damage, although heavily-used cellars often have better flood defenses than unfinished ones.

Apartment buildings in the affected regions are of masonry and reinforced concrete. Commercial buildings are typically of masonry or reinforced concrete, with masonry being the predominant type in Germany and Austria. Note that many buildings in Europe have mixed occupancies, with the ground floor used for shops while the upper floors are residential. Unlike single-family homes, these buildings often have a large degree of engineering and are built to stricter standards with sophisticated flood defenses, particularly in flood-prone areas.

The average take-up rate for residential buildings across Germany is estimated at around 35%. However, there are significant regional differences in insurance.

Note that consistent with what has been observed in previous events, including the 2002 floods, AIR expects much of the loss from the 2013 event to occur outside the floodplain. Smaller claims from off-floodplain losses can add up to constitute a significant portion of total insured losses. Given the duration of this event, AIR expects the flood to be treated as a single occurrence in Germany.