Spain's Costliest Adverse Weather Event in History Anticipated to Drive Total Insured Losses Over EUR 4 Billion

We published a commentary discussing potential financial losses related to the recent adverse weather events in Spain and the role of the Consorcio de Compensación de Seguros (CCS).

Key highlights include the following:
-- The CCS covers the damages generated by extraordinary risks in Spain, including floods, which affected large areas of the provinces of Valencia and Albacete in October.
-- Based on recent estimates, we expect total insured losses, including those covered by the CCS, to exceed EUR 4 billion.
-- The CCS' equalisation reserve is considered sufficient to cover the estimated losses related to the extreme weather phenomenon commonly known by its Spanish acronym DANA (Depresión Aislada en Niveles Altos). However, we expect rates to increase going forward to allow the CCS to gradually replenish the reserve.

"While insurance companies might still be facing higher claims related to climate risks not directly covered by the CCS (including hail and heavy rains), the impact on the Spanish insurance sector's stability would have been significantly higher in the absence of the insurance scheme managed by the CCS", said Mario De Cicco, Vice President, Global Insurance & Pension Ratings at Morningstar DBRS. "The CCS also helps improve the availability and affordability of catastrophe insurance in the Spanish market as well as reduce price volatility".