German homes hit by floods face higher premiums as climate risks increase
Consumer associations and adaptation specialists explore ways to share the costs of disasters more equitably in society
* Less than half of German homeowners have flood coverage
* Higher premiums as climate change leads to flooding
* Uninsured households at risk of going into debt to finance cleaning
By Arthur Neslen
BRUSSELS, July 23 (Thomson Reuters Foundation) – Homeowners struggling to clean up after the deadly floods that swept through Germany and Belgium last week could face additional financial pressure in the years to come as Insurers will increase their premiums to reflect rising climate risks, industry analysts say.
“Market risk premiums need to be balanced with the underlying risk,” Munich Re’s Ernst Rauch said, adding that higher premiums were likely within two years of the floods that killed 191 people in Germany and Germany. Belgium.
“With the changing risk situation, it is almost essential to maintain a long-term sustainable insurance plan,” Rauch, the insurance company’s chief climatologist, told the Thomson Reuters Foundation.
Many more homeowners could be forced into debt to repair the damage: Less than half of German households have specific flood insurance coverage even as climate change leads to more frequent and severe flooding, Munich says D.
Across Europe, around 65% of economic losses from natural disasters were uninsured in 2019, the European Insurance and Occupational Pensions Authority said, and the latest flood devastation has boosted calls for reform.
The German consumers’ association VZBV called earlier this week to share the costs of flood risk among all home insurance policies, as happens under the UK Flood Re program, to prevent most at risk may not be able to afford insurance.
Such a change in cost sharing should be “written into (German) law without delay,” he said.
Premiums for average homes in German flood zones are currently “in the range of € 400” per year, compared with € 100 to 300 in non-flood zones, Rauch said.
But he questioned whether German consumers would accept higher overall premiums to protect people living in flood-prone areas.
It would also be “a negative and reverse incentive” for the real estate industry in such places, he said, removing the financial incentive to avoid living in areas at risk of flooding.
German insurance companies were hit by € 1.7 billion in June’s bad weather, according to the German Insurance Association, and some industry reports suggest last week’s flooding could be among the costliest Of the history.
As climate change results in more extreme weather patterns around the world – from record heat waves to more severe droughts and floods – such scenes can become less unusual, however.
If fossil fuel emissions continue to rise, as they do now, “we can expect these very extreme precipitation events to become much more frequent and intense,” said Sonia Seneviratne, climatologist at ETH Zurich.
Munich Re data over the past 40 years shows “an increasing trend in terms of the frequency of these loss events (extreme weather conditions) and the magnitude of the losses,” Rauch said. This was “probably linked to climate change,” he added.
Swenja Surminski, head of adaptation research at the UK-based Grantham Institute for Climate Change and Environment Research, said the insurance industry should push for more fund management disasters are spent to reduce disaster risk.
Currently responding to disasters afterwards absorbs 88% of funding, she said.
Such spending “is not sustainable and the insurance industry is a powerful player in helping to change this discourse for society, not only as a responsible industry, but also to ensure the viability of its own business model. “said Surminski.
The German government has already announced an emergency aid fund of 200 million euros to support regions affected by floods, which it could further strengthen.
But Daniel Freund, a member of the Green Party in the European Parliament in Aachen – a city hard hit by the floods – said by phone that there was “clearly a risk” that households would be in debt to finance the efforts. of cleaning.
Usually, after disasters, “the first case is people dip into their savings,” said Bronwyn Claire, who manages the ClimateWise program at the Cambridge Institute for Sustainability Leadership.
“I hope they have a little chat to cover the immediate implications… but you really start to see the differences (for disaster recovery) in the medium term” – when people go back to school, to work and to normal life, she added.
Freund said ultimate losses were still uncertain, but the extent of the trauma was already becoming clear.
“The little coves I used to play in as a kid suddenly turned into torrents that washed away entire houses,” he said.
“It was pretty awful to see. Never in the last hundred years has water risen near these levels. It’s unheard of.”
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(Reporting by Arthur Neslen; edited by Helen Popper and Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who struggle to live freely or fairly. Visit http: / / news.trust.org)
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