Mapfre calls for updated CCS wordings after €34mn Valencia flood loss

By Rebecca Delaney

Feb 12 - (The Insurer) - Spanish insurer Mapfre has disclosed that its fourth quarter earnings included a €34mn ($35.2mn) net impact from the floods that affected Valencia in October 2024.

The group’s Iberian business recorded a €27mn hit, with €7mn borne by Mapfre Re, the company disclosed at a press conference on Wednesday.

In its earnings announcement earlier in the day, Mapfre also reported a combined impact of €82mn from the storms in Europe in late Q3 and the flooding across the Rio Grande do Sul region of Brazil in May 2024.

The European storms, predominantly Storm Boris, led to losses of €34mn for Mapfre, while the Brazilian flooding generated losses of €48mn (after reinsurance, tax and minorities).

Speaking at the press conference, Mapfre’s chief financial officer Fernando Mata said that around €42mn of losses from the latter event were borne by Mapfre Re, which made it the costliest event for the reinsurance and global risk business. The remaining €6mn affected Mapfre’s domestic operations in Brazil.

Nevertheless, Mapfre Re posted premium growth of 6.7 percent year on year to €8.4bn for the full year, while profits rose 33 percent to €325mn.

This was in part driven by lower catastrophic claims compared with 2023, when Mapfre Re recorded heavy losses stemming from the Turkey earthquake (€80mn) and Hurricane Otis in Mexico (€75mn).

“We try to include climate events in our fees, and they will increase based on climate change,” said Mata.

“We are going to be seeing more events, and the amount that is being insured is higher. So we've got to affect higher frequency and our higher insured capital, which will lead to a higher catastrophe impact.”

Mata added that Mapfre will continue to reinforce its prudency levels in the Iberia region in response to the rising frequency and severity of secondary perils.

The Valencia floods, also referred to as Dana, underlined this growing uncertainty over weather events, as the largest non-US catastrophe event in 2024.

Cresta estimated that the event will cost the industry $3.9bn, which would make it the biggest loss on record for the insurance industry in Spain. Munich Re has pegged insured losses from the event at $4.2bn.

The majority of overall losses are insured by Consorcio de Compensación de Seguros (CCS), the Spanish government’s compulsory natural catastrophe insurance scheme.

“The Dana flash flood was a tragedy in our country. Fortunately, we have a public-private entity which deals with those funds, which private companies have been able to put together. There's a very tight working relationship between the consortium and the insurance entities,” added Antonio Huertas, chairman and CEO of Mapfre.

“When it comes to reinsurance, we keep a finger close to the pulse. We've been working on climate deviations which aren't necessarily related to climate change, but there are cycles where there's higher frequencies. Insurance has to be ready in order to be able to absorb them, be it through the consortium or through our reinsurance systems.”

Huertas continued that Mapfre is utilising its 400-plus branches on the ground to gather data and insights to aid the CCS’s loss adjustment process. He said the scheme is facing overall losses of around €3bn, slightly under S&P’s initial analysis of €3.5bn.

Mapfre has received around 60,000 claims in relation to the Valencia floods, of which around 26,000 are not included under the CCS pool.

“We have been tremendously active in managing the claims. As far as we’re concerned, over 83 percent of the claims have been completed,” Huertas commented.

“We have our way of working and the consortium has a different way of working, but we're doing our best to ensure that all of the insured parties are duly cared for.”

He concluded that the CCS may need to consider an update to its wordings to ensure greater clarity for policyholders and insurers alike.

“I'm a firm believer in the good of the consortium, but Mapfre and the sector are also aware that the consortium was born in 1954. The socioeconomic evolution of the climate events we've been seeing have nothing to do with what we had 40 to 50 years ago,” he said.

“It's very difficult to explain to citizens that the water that comes from the air is incurred by the consortium, but everything that comes from your ceiling is paid by the insurance company. We believe [the CCS] is playing a huge role in Dana, but we do want them to go over the wording conditions in the future to make them more stable.”