European Flood Update – Losses in the Billions

Even as German Chancellor Schroeder met with other European leaders in Berlin on Sunday to find ways of dealing with the unprecedented floods sweeping across Eastern Europe, workers in Budapest struggled to contain the waters of the Danube from surging into the city, and countries further downstream braced for the onslaught.

Although the floods will undoubtedly have an impact on the insurers who operate in the affected regions, the majority of the losses aren’t covered by insurance, and leaders are already seeking aid from the European and International Community to begin the task of rebuilding. Meanwhile river traffic remains at a standstill with thousands of tons of freight unable to be delivered and local economies virtually at a standstill.

The losses are high. Czech officials indicated that the total would exceed $2 billion. In Austria the damage is expected to be at least $3 billion. The German Farmers Association indicated that agricultural losses alone would run to $1.5 billion. German officials have so far said only that total losses would be “in the billions of euros.”

Munch Re and the Austrian Insurance Association have given some preliminary estimates of the insured losses – $500 million and $100 million respectively (See IJ Website Aug.16), but so far no overall figures have been given.

Germany’s Allianz, Europe’s largest insurer said only that “Based on first reports and the scope of the flood, the amount of claims is estimated to reach several million Czech Korunas” (31.72 Korunas = $1). Other reports indicate the company is facing around $10 million in claims from the Czech republic, around $20 million in Austria, and at least twice that in Germany.

In fact the full extent of the losses won’t be known for several more weeks, perhaps months, when the floodwaters recede, and commercial traffic is reestablished.