The insurance sector is preparing to face the costliest natural disaster in Spain’s history

The disaster that ended in Valencia and other areas of the Spanish Levant on Tuesday afternoon and that, for now, He has killed almost a hundred peopleon track to become the costliest natural disaster in Spanish history. Most veterans of the insurance sector don’t remember anything like this, because of its impact on infrastructure, business, commercial and logistics centers, crops, homes, trucks and cars . “Losses are going to reach unprecedented levels,” explained a manager who specializes in claims.

Insurance companies such as Mapfre, Mutua Madrileña, Línea Directa, Generali or Zúrich Seguros sent all their teams to work early in the morning to serve the people and companies affected. The flood of calls at different times of the day caused the phone lines for the victims to be full.

In a disaster of these dimensions it will play a fundamental role Insurance Compensation Consortium (CCS)a public body under the responsibility of the Ministry of Economy that is financed by small costs that are applied to current insurance policies. In this case, the damage caused by the damage will be covered mostly by this group. This entity compensates for damage caused by catastrophic natural phenomena, including heavy rains, hurricanes or volcanic eruptions such as the one in La Palma in 2021. In particular, it covers damage both affected homes and vehicles in the event of flooding. on the insurance. There is no need for a comprehensive policy or a policy that specifically covers these risks. It is enough to have basic, home or car insurance, and to be up-to-date with payments. Even with third party car insurance, the Coalition will take care of the damage suffered by the vehicles if it was caused by the flood.

The CCS will also pay business owners who have seen water enter their stores or warehouses and damage goods. To the farmers who lost fruit trees. It will even take into account the loss of profit suffered by companies that have to close due to the flood. The final cover will always depend on what the person specified in their cover with the insurer. If he dies, if the person had life insurance, the Coalition will be the one to compensate the beneficiaries of the policy.

The CCS, based on Paseo de la Castellana in Madrid, has the country’s leading experts in the assessment of catastrophic events. Every year, their research team publishes a report listing the natural disasters in which they had to pay large compensation. The chilling statistics, which date back to 1977, are a frightening history of the death and destruction that nature can cause.

The 2023 report includes the 85 worst disasters the Coalition has dealt with: cold fall of Murcia and Valencia in 1987, the extra tropical cyclone Klaus (which swept through northern Spain in 2009, causing 12 deaths), the Earthquake Lorca of 2011… And, above all of them, the Vizcaya floods 1983. As a result of this latest tragedy, which devastated the metropolitan area of ​​Bilbao and cities such as Durango, Llodio and Bermeo and caused 34 deaths, compensation was paid in the amount of 977 million current euros (adjusted for inflation).

Pilar González de Frutos experienced these Bilbao floods first hand. She was the deputy technical director of operations for the Insurance Compensation Consortium at the time. “That was terrible, with an intensity of rain not seen in 500 years, but what happened in Valencia could be even worse,” said the director, who after that post was head of the General Directorate of the Insurance, he was the head of the sector’s employers’ association for two decades. “Something is obvious, and that is that the level of population density and wealth that exists in the Valencia belt is now higher than in Bilbao 40 a year ago, although it is still too early to estimate the total damage,” he recalls.

Journalist Íñigo de Barrón, who was a direct witness to the Vizcaya disaster in 1983, recalls the Dantesque scenes he witnessed: “There were landslides that buried houses, heads of cattle floating through Nervión estuary and ended up in the sea, polluting the beaches.”

The Bilbao of the early eighties, which is still the center of the worst natural disaster in recent Spanish history, was very different from the Valencia of today. There were far fewer cars, fewer shops, fewer logistics centers. “It is true that part of the industry has been affected but, for example, the blast furnaces de Vizcaya did not stop,” said De Barrón.

From one of the three largest car insurance companies in the country, they also agree that the accident that started yesterday is the biggest ever seen. “In terms of damages covered by the Coalition or by insurers, there is no doubt, because now there are many more cars than before, and home insurance is much higher than before he in the 80s, when he was a minority.” They also remember, therefore, that the Coalition did not cover damage to vehicles that only had third-party coverage, and now it response in these cases.

Caring for the first effect

From the claims department of a multinational insurance company operating in Spain, they explain that the priority in these first hours is “addressing the most urgent needs of the affected clients.” Then comes the restoration of water, electricity, gas, internet. And, then, “the processing of the first claims, first with compensation payments.”

Their reference is to measure the magnitude of the tragedy in Valencia and Albacete dana 2019 in the Levante peninsulawhich caused six deaths and caused damage covered by the Coalition worth 478 million euros. “The level of damage is going to be much higher than that other disaster, because it has affected an area with a much larger population and resources,” explained a leader from this area, during a short break during as he coordinates care for thousands of affected customers.

In the 2019 damages, the compensation faced by the CCS was 478 million euros. However, the total assessment of all the damage (impact on infrastructure, companies unable to open for months, damage to street furniture…) represented a total bill of 2,270 million euros, according to the calculations sent by the Government of the Spain to Brussels to request support from the European Union Solidarity Fund. Therefore, the total damage from an accident of this type can multiply by four or five the part borne by the Coalition.

Most veterans of the insurance sector also remember the great flood in Valencia in 1957, in which the River Turia overflowed and in which there were 87 deaths. The director of the claims department of another insurance group explains that “when we were talking about deaths, there have been other terrible events, such as the flood at the Biescas campsite in 1996. [con 87 personas muertas]but economically, I think we’ve never seen anything like it.”

Sources close to the CCS rule out any kind of assessment for now, “as there are still areas that cannot be accessed and the storm is moving to other areas. They emphasize the important work done by this group, with strong public-private collaboration and a model that other countries have copied.