Polish insurers' costs amid floods at EUR 680 mln - S&P Global Ratings report

S&P Global Ratings agency estimates the cost to insurers in Poland after the floods at around EUR 680 million, the agency's report said. S&P estimates that insurers rated by the agency, including PZU, have strong buffers against natural catastrophe claims.

"According to the first estimates of the Czech Insurance Association (CAP), the insured losses in Czechia will reach about 17 billion Czech koruna (about EUR 680 million)," S&P said in the report.

"Losses are expected to be equally split between households and commercial entities. At that level of expected insured loss, the 2024 floods would likely exceed the insured losses of the 2013 floods in Czechia and become the nation's second most expensive natural catastrophe, behind the flood of 2002," it added.

The agency stressed that the impact of natural disaster on insurers' underwriting results in 2024 will be rather minor.

"While we believe rated insurers could see some limited impact from the floods on their P&C underwriting results in 2024, we expect that reinsurance protection, strong overall earnings in the first six months of 2024, diversified earnings streams from life and health insurance, and sound capital buffers both under Solvency II and the S&P Global Ratings' capital model are strongly supportive factors and a financial buffer against the natural catastrophe claims," S&P experts wrote.

S&P does not expect claims arising from the floods to cause any liquidity constraints for the insurer groups it assesses. These risks are largely reinsured in the agency's assessment.

"Additionally, the insurers have a large amount of high-quality and liquid

assets. We expect that VIG, UNIQA, PZU and Talanx will maintain exceptional liquidity and thus don't expect any issues that would hinder them meeting their obligations or quickly settling claims from the floods," the agency pointed out.

At the same time, the agency points out that the recent floods are likely to test the operational agility of insurers and the resilience of their digital operations, given that the number of flood claims is expected to run into the tens of thousands of zlotys.

"Insurers' capacity to assess and settle claims will, in particular, provide an indicator of their client focus," S&P said in the report.

"In addition, because flood risk is often underinsured across the affected regions, insurers communication with policyholder will be important to client retention and the maintenance of a good reputation," it added.

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