June 5, 2013 / 4:42 PM / 6 years ago

Europe's insurers seen escaping brunt of flood damage

* Too early to estimate size of damage claims -insurers

* Latest floods appear less extensive than 2002 -Allianz

* Industry flood claims were 3.5 bln eur in 2002 -Munich Re

By Chris Vellacott and Jonathan Gould

LONDON/FRANKFURT, June 5 (Reuters) - As insurers start counting the cost of devastating floods across central Europe, many of the region’s businesses and households are not covered and will have to foot the bill themselves.

Nicolaus von Bomhard, chief executive of the world’s largest reinsurer Munich Re, attributed under-insurance for flood risk in the worst affected areas to a legacy of insurers’ past reluctance to offer services in the region.

While this has changed and insurers are now prepared to insure almost all the risk, under-insurance remains a problem in the region, he said.

“On the losses, I can’t give any numbers, it’s way too early, but the macroeconomic loss will be much bigger than the insured loss,” he said at an insurance industry news conference on how insurers and governments could work to reduce the impact of natural disasters.

But while waters were still rising and thousands of Germans, Hungarians and Czechs were evacuating their homes, some industry specialists said they expect the insurance loss to fall short of the last big floods to hit the region in 2002.

“Although some areas are experiencing higher waters, investment over the last 10 years has meant that flood defences in a number of locations are working better than in 2002,” said Michael Jedraszak, reinsurance expert at Hiscox.

The view was also reflected by Europe’s biggest insurer, Allianz, although hundreds of its claims inspectors were only now getting into the affected areas.

ECONOMIC DAMAGE

“Many people are making parallels to 2002. However, we are not seeing the same extent of damages yet,” Allianz board member Clement Booth said in a statement.

The 2002 floods caused economic damage of 16.5 billion euros ($21.6 billion) and insurance claims to the industry of 3.5 billion, according to data from Munich Re.

Munich Re and its big rivals Swiss Re and Hannover Re cautioned on Wednesday that it would take some time, possibly weeks, before they had an accurate read-out on the extent of the damage.

About one third of German households are insured against natural catastrophes like floods, heavy rain or mudslides, but that insurance is either unavailable or unaffordable for many in areas that see frequent flooding.

However, insurers expect big claims for waterlogged cars, which are usually a complete writeoff.

“That will cost the market a lot of money,” said Klaus-Juergen Heitmann, board member for property-casualty business at mutually owned HUK Coburg, market leader for car insurance in Germany.

Germany’s largest residential insurer, Stuttgarter SV Sparkassenversicherung, which is linked to the public sector savings bank system, said it was setting aside 40 million euros to cover the cost of the damage in the middle of Germany where its business is focused.

Bavarian insurance group Versicherungskammer Bayern said it was also reserving 40 million euros for its share of claims.

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