According to S&P Global Ratings, the deadly flash floods that hit the Valencia region of Spain will have “limited effects” on private insurers and reinsurers, given that the Consorcio de Compensación de Seguros (CCS), the institution attached to the Ministry of Economy, Trade, and Business, will cover most of the claim costs.
For those unaware, more than 200 people were killed in flash floods caused by a weather phenomenon known as DANA, marking the worst flooding in Spain in decades. Other affected areas include Castile-La Mancha, the Region of Murcia, Andalusia, the Balearic Islands, and Aragon.
As per the CCS, insured losses from the event amount to €3.5 billion, with most of the costs resulting from damages to properties such as residential houses, motor vehicles, offices, shops, warehouses, industrial sites, and infrastructure, as well as business interruption.
“Even so, we forecast that the effects of these losses on insurers’ results will be limited, relative to the magnitude of the event. We therefore do not expect any effects on our ratings on Spanish insurers,” S&P said.
S&P credit analyst, Simon Virmaux, added, “The property/casualty insurance industry in Spain is exposed to low risk because the CCS mitigates the volatility of profitability from natural catastrophe events by absorbing the majority of peak losses. We therefore believe the flash floods will also have a limited effect on the global reinsurance sector.”
S&P noted that in addition to the insurance cover provided by the CCS, the Spanish government announced various financing tools to support the Valencia region and its reconstruction over the medium to long term.
“We will monitor the evolution of economic and insured loss estimations. We will also continue to consider the effects of extraordinary weather events on insurers’ credit profiles and the mechanisms and climate adaptation measures that insurers have in place,” the rating agency concluded.
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