Flood Damage in Spain Could Exceed 10 Billion Euros

Recent flooding disasters in eastern Spain have caused significant damage to businesses, with estimated costs exceeding 10 billion euros. On Tuesday, Spanish government officials and local business representatives reported that the economic impact of the floods could be substantial, and that the banking sector in affected areas faces credit risks of approximately 20 billion euros.
The Spanish government has allocated around 10.6 billion euros to support the victims of what has been termed one of the worst flooding disasters in Europe in recent decades. At least 217 people have lost their lives as a result of the disaster, with more still reported missing.
Angel Estrada, head of financial stability at the Bank of Spain, noted that loans in the Valencia region, one of the hardest-hit areas, are expected to rise to 13 billion euros for households and 7 billion euros for businesses. The central bank has identified approximately 23,000 companies and 472,000 credit holders in the flood-affected regions.
To alleviate the financial burden on residents, the government and banks have agreed to offer a mortgage moratorium on 150,000 contracts. Under this agreement, customers will not make monthly payments for the first three months and will only pay interest for the subsequent nine months.
Estrada emphasized the importance of ensuring that these moratoriums do not lead to the reclassification of loans, as this could necessitate higher provisioning. He also indicated that it is still too early to determine the exact economic impact of the floods, but stated that the capital destruction is likely to be more significant than that experienced during the COVID-19 pandemic.
The banking sector is expected to absorb this impact, but Estrada underscored the urgency of addressing the accelerating physical risks of climate change and the transitional risks associated with moving to a low-carbon economy.
Jose Vicente Morata, President of the Valencia Chamber of Commerce, stated that the damage incurred by businesses in the most affected areas is likely to exceed 10 billion euros. Mirenchu del Valle, president of Spain's UNESPA insurance association, mentioned that the floods in Valencia could represent the largest damage claim for a climate event in the country, although she did not provide a specific figure.
The costliest flood-related economic event in Spain occurred in 1983 in Bilbao, with claims surpassing 821 million euros according to the Spanish insurance consortium, and an additional 1.08 billion euros in associated costs due to severe wind damage.