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German Chamber of Commerce joins call for risk-based approach to flood risk

The German Chamber of Industry and Commerce (DIHK) has called on regional and national authorities to show flexibility and agility to help with the reconstruction process following the recent catastrophic flooding.

The DIHK has also joined other interested bodies such as the German Insurance Association (GDV) in a call for better planning, construction codes and improved risk management for future construction projects, in light of the worsening impact of climate change in Germany.

“We now need quick and easy solutions,” said DIHK president Peter Adrian on the consequences of the flood disaster.

Mr Adrian said the companies in the flood areas of western and southern Germany need clarity very quickly on the way forward. Often long, complex and overly bureaucratic planning processes need to be addressed, said Mr Adrian.

“Many thousands of operating sites were destroyed or damaged by the recent flood events. Many other companies are severely hindered in their operational activities by the fact that roads, rails or networks are partially or completely missing from the flood,” he explained.

“We therefore now need quick and simple solutions for the affected company locations and for rebuilding the infrastructure. For companies, clarity must be created very quickly as to whether and how they can begin their new start with a climate-adapted construction method at the previous location. The companies and their workforce place their hopes in such future prospects,” continued Mr Adrian.

The DIHK said companies and administrations in the affected regions need support to accelerate the planning and approval procedures onsite. Planning experts from federal and state institutions can hopefully support many of these procedures. Companies would also benefit from accelerated approval procedures or permit exemptions wherever possible, added the body.

“Based on the experience of previous floods, it is advisable to take into account climate-adapted, sustainable flood protection on the one hand and site development on the other. In concrete terms, this means that all relevant actors – from urban and regional planning to environmental and water protection, and to the local companies – should shape the reconstruction process together from the start,” stated the DIHK.

Meanwhile, the new German government that will be elected later this month will also be hearing from the GDV as it seeks to discuss potential solutions for systemic risks, including natural catastrophes.

The GDV recently confirmed that the losses suffered so far this year, mainly from flooding and hail, will make 2021 the costliest natural hazard 12 months for German insurers in at least 50 years. The total insured bill is expected to now reach at least €11.5bn.

The GDV has stressed heavily during the past few weeks how relatively little of the nat cat losses have been uninsured.

Nationwide, nearly all residential buildings are covered for windstorm and hail. However, only 46% of homeowners have protection against other natural hazards such as heavy rain and floods, said the GDV.

Action is needed to tackle this problem at state level to help promote loss prevention, risk management and potentially mandatory cover, argued the association.

The GDV recently announced that it will present proposals shortly on how nat cat risks can be more effectively tackled on a cost-effective basis.

“Together with our member companies, we will be presenting ideas by autumn on how the spread of natural hazard insurance can be significantly increased at risk-based prices. It is also important to reach those who, despite the recent flood disaster, do not want to believe that they too can be affected by natural hazards,” explained GDV managing director Jörg Asmussen.

“Everything must be done to prevent damage through protective measures or at least to significantly reduce its extent. The German insurers are therefore in favour of a new overall concept for climate-change adaptation, consisting of education, binding measures for private and state prevention, and insurance,” he continued.

The GDV stressed, however, that mandatory flood insurance without robust incentives for better loss prevention and risk management will not work.

“As a single instrument [mandatory insurance], we reject it because it takes away the incentive to insure against flood and other extreme weather risks… At best, it would make sense if it were integrated into a new overall concept for land and building planning, and disaster protection,” said Mr Asmussen.

“It is encouraging that nearly half of building owners now have protection against other natural hazards. But for the rest, they should review and adjust their insurance coverage,” he added.

The GVNW will also play its part in the search for more robust solutions to make the German economy and society more resilient and prepared for future crises.

During its Symposium that opens today, the potential for public-private partnerships (PPPs) to tackle systemic risks will be on the agenda.

Alexander Mahnke, president of the GVNW, conceded that little progress has been made on this important topic since last summer. But he told Commercial Risk Europe shortly before the Symposium that the association is in no mood to give up and stressed again that any scheme should not be limited to pandemics, especially in light of the recent flooding and continuing rise of the cyber threat.

“We are convinced this [PPP solution] is still possible and necessary when it comes to pandemic risk. We have said from the beginning that this should not just be limited to health crises. While we are lobbying for such a vehicle with a focus on pandemics for now, this should not be exclusive. Cyber or nat cats can also create scenarios where the insurance market will not be able to respond,” Mr Mahnke told Commercial Risk Europe just before the GVNW Symposium opened today.

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