German insurer Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts’ (VKB) has supplied an replace on its losses from the extreme flooding that struck southern elements of Germany in June 2024, highlighting they continue to be well-below the attachment level of its King Max Re DAC 2023 disaster bond, Artemis has discovered.
VKB efficiently sponsored its first disaster bond in December 2023, securing an upsized €175 million of multi-peril indemnity and per-occurrence disaster reinsurance safety from the capital markets.
The disaster reinsurance supplied by the King Max Re cat bond protects VKB group towards losses from earthquakes, hailstorms, floods and windstorms in Germany, over a 3 yr time period starting January 1st 2024.
Which suggests the cat bond was uncovered to the main flood occasion that struck southern Germany initially of the summer season, starting Could thirty first and working into the primary week of June.
The King Max Re DAC cat bond notes have an preliminary attachment level at €900 million of losses to VKB’s enterprise and their reinsurance protection for the insurer would exhaust at €1.1 billion of losses.
Various business loss estimates had been issued for that flood occasion, from the German insurance coverage affiliation saying it anticipated the flooding to drive around a €2 billion insurance market loss, to Moody’s (RMS) that put an upper-limit to its insurance market loss estimate at US $3.2 billion, in addition to Verisk’s Extreme Event Solutions had estimated that the flooding in southern Germany would drive insurance industry losses in a range from US $2.6 billion to $3.9 billion, and eventually PERILS AG who initially estimated insured losses from the flooding at €1.6 billion.
Sources have now instructed us that insurer VKB has up to date the disaster bond market to say that at this stage it estimates between €350 million and €500 million of losses from this June flood occasion, so that is well-below the €900 million King Max Re cat bond set off.
Because of this, VKB is alleged to have up to date the market to clarify that, primarily based on the present estimate its disaster bond wouldn’t be affected by the flood loss, regardless of the water ranges rising to across the 1-in-100 yr flood heights.
One cause for that is that the floods had been significantly impactful in elements of Bavaria, which is a area VKB stated it has a decrease market penetration in, in comparison with different areas of Germany.
Given the place the most recent loss estimate for this flooding occasion sits for VKB, it appears comparatively secure to imagine the loss couldn’t creep excessive sufficient to hassle holders of the cat bond notes.
It’s maybe additionally value noting right here that, Hannover Re this morning disclosed just a €160 million gross impact from these floods, which when in comparison with VKB’s expectations of loss displays simply how a lot the economics of threat sharing have modified within the business over latest years.
You possibly can learn all about this King Max Re DAC 2023 disaster bond transaction to our Deal Directory, the place you’ll be able to analyse particulars of virtually each cat bond ever issued.
