Morningstar DBRS has indicated that the financial losses related to insurance claims from the severe power outage in the Iberian Peninsula will be manageable, with insured losses estimated between €100 million and €300 million in Spain, and significantly lower amounts expected in Portugal.
Although the cause of the outage remains unknown, the blackout reportedly affected households, small businesses, and large corporations, causing severe traffic and travel disruptions across Spain and Portugal.
Meanwhile, rail transportation was suspended during the day, and several flights were cancelled across the two countries.
“We believe that the effects of the blackout could generate a spike in claims related to home, commercial, travel, and business interruption insurance,” Morningstar DBRS said in a new report monitored by Reinsurance News.
The firm stated that while insurance companies are likely to find the financial losses derived from this event manageable, Spanish and Portuguese insurers will likely receive an exceptional volume of claims in the aftermath of the blackout, which could put their operational capabilities under stress.
“We believe the financial losses related to claims payouts for insurance companies will be manageable. While it is difficult to estimate the insured losses in the ongoing situation, our initial expectation is that insured losses would range between €100 million and €300 million in Spain and a fraction of that in Portugal,” Morningstar DBRS observed.
The firm continued, “Total economic losses will be several multiples of these estimates. However, we believe that Spanish and Portuguese insurance companies will be dealing with an extremely high volume of claims due to the exceptional nature of the event and the widespread effect of the power outage.
“Significantly large volumes of claims in a relatively short time can put insurers’ operational capabilities under stress. Failure to respond promptly can also lead to reputational damage in a highly competitive environment and legal actions. We will continue to monitor the situation and provide updates on time.”
