Mandatory risk prevention measures needed to close German insurance gap

The German Insurance Association (GDV) has repeated its call for mandatory loss prevention and risk mitigation measures to be introduced to help in the battle against rising flood losses and underinsurance, as the sector finds it increasingly difficult to provide cover at affordable rates.

Publishing an analysis of the German insurance sector’s long-term balance sheet from 2002 to 2021, the GDV said that storms and associated flooding are a particular concern.

It said that, by taking preventative measures, every homeowner can reduce damage to their property caused by natural disasters. For example, by upstands on basement stairs or installing pressure-tight windows.

German insurers are calling for binding measures to adapt and prevent climate impacts.

“If the federal and state governments do not ensure adequate protection for houses and cities, building insurance will become very expensive and many owners and tenants will be significantly burdened,” said the GDV’s managing director Jörg Asmussen.

Without prevention and adaptation to climate impacts, the insurance gap for natural hazards will not be closed, he added.

“We insurers have put forward proposals for greater climate resilience and precautions that will ensure insurance coverage remains affordable,” said Asmussen.

The GDV’s analysis found that the worst-affected areas over the period were Rhineland-Palatinate and North Rhine-Westphalia.

The Bernd flash flood in the summer of 2021 that caused some €8.4bn in insured losses was by far the worst natural disaster in Germany in recent times, and hit the Ahrweiler district of the Rhineland-Palatinate the hardest.

“Storms, hail and floods caused by heavy rain or floods caused an average of €109,000 in damage to buildings there from 2002 to 2021,” said Asmussen.

The long-term analysis of natural hazard damage found Euskirchen in North Rhine-Westphalia (€41,100) and the Eifel district of Bitburg-Prüm in Rhineland-Palatinate (€17,500) in second and third place.

The safest place to live in Germany from a natural catastrophe perspective over the last 20 years has been Heidelberg in Baden-Württemberg. The average damage caused by extreme weather events is only €752 there. The national average is around four times higher at €2,900 per building within 20 years.

Currently, only around 52% of buildings in Germany are covered for natural hazards through standard property extensions. The remaining 485 of buildings are, for example, not insured against damage caused by flooding as a result of heavy rain.