European flood toll turns into cash torrent

Insurance companies are beginning to count the cost of the flooding that has swept across Europe in the past week and are expecting the overall bill for damages to run to billions of euros.

Munich Re, the world's biggest reinsurer, said the total cost of flooding damage is likely to be more than €1bn (£640m).

Allianz, Europe's biggest insurer chaired by Henning Schulte-Noelle, is understood to be facing losses running into tens of millions of euros alone. This is much higher than the loss caused by the flooding of the River Oder in east Germany five years ago, when the Munich-based insurer had to cover claims of about€6.5m.

A spokesman for Allianz said it was still too early to assess damages from the current flooding, as many policyholders are still in emergency accommodation and have yet to start bailing out their flooded homes.

The damages are likely, however, to be substantially higher than losses incurred in 1997. A double-digit figure in the millions of euros is expected.

Much of the flooding has taken place in the south-east of Germany. Yesterday waters from the River Elbe were rising on the city of Dresden, in Saxony, where 30,000 people have already been evacuated.

Chancellor Gerhard Schröder, has called the flooding a national catastrophe and said four million people have been affected. He has made €100m available to help the rescue effort.

Allianz, which has 20 million policyholders in Germany, is particularly exposed to claims in eastern Germany as it took over the home and contents insurance of about three million people from the former state insurer.

It is bracing itself for a substantial number of claims and said a first loss estimate should be available next week. Shares in Allianz in London closed down 3 per cent at 7,936p.

A spokesman for Allianz said: "We are not yet able to release a specific figure because many of our customers are still unable to tell us how big the damage is. We do have a lot of policyholders in east Germany. The flooding there is tremendous."

Munich Re, however, said insured losses will only account for a small proportion of the total bill. It is waiting for waters to subside before it will give a gauge of its own losses. A spokesman for the company played down the scale of the potential claims and said pictures did not give a true impression of the damage to insured property.

"This is more of a regional phenomenon than something that is concerning the whole public," a spokesman for Munich Re said. "The insured loss will be a relatively small part of the total damage."

Analysts said loss estimates are likely to fall short of the amount eventually paid out, as it often takes weeks for claims to be made. But the losses are unlikely to have a huge impact on the capital base of large insurers such as Allianz, as this is the first major natural catastrophe they have experienced this year.

William Hawkins, an insurance analyst at Fox Pitt Kelton, said: "In the context of limited natural catastrophe losses to date, this particular event is likely to be well within the budget of most insurers."