Storm Friederike to constrain German P&C insurers’ earnings

Storm Friederike is expected to increase German property/casualty (P&C) insurers’ full-year 2018 combined ratio by 1 to 2 percentage points, according to Moody’s.

The German Association of Insurers (GDV) estimated the insured loss from Storm Friederike at around €1 billion, making it one of Germany's costliest natural catastrophe events since 1997. Its extreme winds tore across Western Europe on Jan. 17 to 19, damaging buildings in the UK, the Netherlands, Belgium, Luxembourg, France, Germany, Poland, and the Czech Republic.

A €1 billion loss in January alone would be equivalent to about 50 percent of the German P&C sector's average property natural catastrophe claims for the full year, presenting an additional headwind for its 2018 earnings which are already constrained by low interest rates, according to Moody’s.

Over the past 25 years (1992-2016), annual natural catastrophe losses for the German P&C insurance sector have averaged around €3 billion, of which approximately €2 billion is attributable to property insurance. Storm losses in January 2018 alone could therefore already account for over 50 percent of German insurers' total property natural catastrophe losses for the year, especially when Storm Burglind, which hit the country earlier in the month, is included.

While Moody’s expects the largest German players such as Allianz, Talanx and R+V Versicherung to suffer storm losses, the impact could be proportionally larger for provincial insurers, as a result of narrower geographical diversification.

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