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Germany's first floods loss estimate nears $8 billion

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The first estimate of some of the damage from the deadly rain and floods in Germany this month puts insured losses near €5 billion ($8 billion).

The German Insurance Association (GDV) says that initial preliminary estimate covers last week's flood disaster in North Rhine-Westphalia and Rhineland-Palatinate.

Damage in Saxony and Bavaria is not yet included.

Nationwide, nearly all residential buildings are covered for windstorm and hail, but only 46% of homeowners have protection against other natural hazards such as heavy rain and floods.

This year is still likely to be the most damaging year since 2002 when insured storm damage was €10.9 billion ($17.46 billion), GDV says, due to storms, flooding, heavy rain and hail across June and July.

Clean-up work in the disaster areas is still underway and destroyed infrastructure makes communication and inspection difficult.

"The damage is likely to be even higher than that of the August flood in 2002 of €4.65 billion ($7.45 billion),” GDV CEO Jörg Asmussen said. “Bernd is one of the most devastating storms in recent history.”

June rains and hail had already caused an estimated insured loss of €1.7 billion ($2.72 billion) and since July 12, countries in Europe have been struck by catastrophic floods, killing at least 180.

Belgium and Germany - as well as Austria, Luxembourg, the Netherlands, Switzerland and Italy - were all severely affected.

Mr Asmussen says insurers have been working under pressure for days to assess and settle claims and are still evaluating the events. The association will update loss estimates for the storms next week.

"We are doing everything we can to help pragmatically and efficiently so that our customers' claims can be processed quickly and without complications," he said.

Ratings agency AM Best says German insurers' disciplined pricing means carriers should be well-positioned to absorb heightened weather-related losses, despite potential record natural catastrophe claims in 2021.

The losses are expected to reignite debate in Germany about the creation of a state-backed natural catastrophe scheme versus making elemental insurance cover compulsory.

Unlike many other European countries, Germany has no scheme in place and flood risk is excluded from standard policies. While flood cover may be added as an extension, insurers can be reluctant to accept risks, mainly due to a lack of widespread reinsurance cover, AM Best says.