Insurers Expect Major Loss Event From Floods in Southern Germany

Insurers are preparing for an above-average loss event as a result of floods in southern Germany.

“The pictures from Bavaria and Baden-Württemberg foreshadow the worst. Our companies are already receiving many claims reports,” according to Jörg Asmussen, managing director of the German Insurance Association (GDV).

“However, it is still far too early to estimate the damage,” he said. “We can only give a forecast when the levels have dropped everywhere.”

Insurance Penetration Varies

How badly the disaster will hit the insurance sector also depends on how many of the affected houses have natural hazard protection, which also covers damage caused by flooding, heavy rain or avalanches, GDV said.

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In Bavaria, 47% of buildings are insured against all natural hazards, while in Baden-Württemberg the proportion is 94%. GDV explained that penetration levels depend on whether local laws require all building owners to be compulsorily insured against fire and natural hazards.

Asmussen warned that insurance alone is not a solution if state and individual flood protection fall by the wayside.

In view of more frequent severe storms – especially in Germany – more must be done to build resilience to floods, as the breached dams in Bavaria show, GDV said.

“We need building bans in flooded areas, an obligation to use water-resilient building materials and better flood protection facilities. This is the only way we can break the spiral of rising claims and rising premiums,” Asmussen continued.

Two Floods This Year

Insurers have had to respond to two floods since the beginning of year. Over Christmas, many rivers burst their banks in northern and central Germany, causing damage of an estimated 200 million euros. Further, the floods in Saarland and Rhineland-Palatinate in May were similarly devastating, according to the preliminary forecast from the GDV.

Costliest Natural Disaster

The most devastating natural disaster to date in Germany was the July flood of 2021, which caused devastation in Rhineland-Palatinate and North Rhine-Westphalia, in particular. At that time, insured losses amounted to almost 9 billion euros.

Source: German Insurance Association (GDV)

Photograph: Roads are flooded after heavy rainfalls in Babenhausen southern Germany, on Saturday, June 1, 2024. (Nikolas Schaefers/dp/dpa via AP)