Heavy rains in Central Europe that caused recent river flooding should produce total property insurance losses lower than an earlier severe flood event in 2002, but this is still credit negative for insurers exposed to affected territories, Moody’s says.

In a report in the rating agency’s Credit Outlook publication, Moody’s Associate Analyst Martina Reptova said current information suggests that total insurance claims will be less than the €3.5 billion ($4.6 billion) of claims that resulted from severe European floods in 2002.

Some areas that recorded material damage costs in 2002, including Slovakia, Hungary, Russia and Romania, were significantly less affected by last week’s floods, the analyst wrote, also noting that insurers have imposed stricter underwriting standards that focus more on restrictive terms and conditions, and in some cases did not renew coverage for some loss-exposed businesses, in recent years.

Nonetheless, the situation is still developing as the rivers could flood some areas of North Germany and Hungary in the coming days, Reptova noted, adding that business interruptions claims, which usually are a significant source of claims in flood events, are inherently difficult to estimate and are often initially underestimated by insurers

The countries most severely affected by last week’s floods were Germany, the Czech Republic and Austria.

The primary insurers with the biggest footprint in these countries—and the ones Moody’s expects to have the highest exposure to losses—include Allianz SE (Aa3 negative), which has a combined market share in these countries of 9.5 percent, and Assicurazioni Generali S.p.A. (Baa1 negative), whose market share is 5.2 percent (based on 2011 market share figures compiled by Moody’s from company’s annual reports, Swiss Re-sigma, Association of Austrian Insurers and Association of Czech Insurers).

Moody’s said it also expects the flood to have a negative impact on the profitability of insurers with lower market shares, including the P/C subsidiaries of AXA Konzern AG (financial strength Aa3 negative), Vienna Insurance (unrated), and Ergo Versicherung AG (unrated), a German primary P&C insurer and subsidiary of Munich Reinsurance Company.

Source: Moody’s Investors Service; AP Photo