 Elbe flooding © Grahn [4], CC BY-SA 3.0 [5] |
Heavy rainfall has caused devastating floods in south east Germany, western Czech republic, Austria, Hungary, Switzerland and Slovakia with damages amounting to several billions of dollars.
Worsened by the snowmelt and record swelling of waters of the Elbe and Danube, these floods may turn out to be more costly than those of 2002, characterized then as “the floods of the century”. As a reminder, the 2002 events caused 17.3 billion USD of economic damages, 3.6 billion USD of which to the charge of insurers.
Human and material losses
According to a provisional toll, floods in Central Europe claimed the lives of 20 people, 5 of whom in Austria and 10 in the Czech Republic, with several thousand people being evacuated. In addition, 5.5 million households have been affected and hundreds of cities and villages were flooded. In Germany, more than 335 000 hectares of agricultural land have been completely submerged by rising waters and another 55 000 hectares sustained the same fate in the Czech Republic. Farming will be the hardest hit with losses estimated at billions of dollars by experts.
For Germany alone, the rating agency Fitch forecasts economic losses worth 16 billion USD and insured losses amounting to 4 billion USD. The Czech government is expecting more than one billion USD of damages. As for the Swiss confederation, the association of Swiss insurers has posted a provisional toll of 43 billion USD, a figure that is likely to be revised upwards very soon.
Loss of profit
Apart from the direct material damages, these floods are poised to strain the economic activity of the entire region, with huge business interruption looming ahead and supply chain being seriously disrupted. Car manufacturer Porsche in Leipzig had to interrupt its operations for non-availability of spare parts while hundreds of factories were flooded or compelled to stoppage as a precautionary measure. In Austria, the energetic group Verbund has ceased seven of its nine hydraulic plants. In the Czech Republic, work on several chemical plants, located on the border of the Elbe has been suspended, thus triggering the suppression of several thousands of jobs.
It will take insurers and reinsurers several months to assess the real cost of these catastrophes and their impact on their portfolio. Allianz has posted the provisional figure of 650 million USD of losses for all of Central Europe. For Germany alone, Munich Re forecasts a loss of 400 million USD and Hannover Re 300 million USD.
In light of the scale of these damages, the German federation of industry fears an economic slowdown while the Austrian central bank estimates that reconstruction costs will affect the country’s growth.