Effects chain – Example presentation from the ‘financial' action field | Umweltbundesamt

Climate changes relevant to the action field

State: Extreme events – heavy rain

It is to be expected that – owing to changed meteorological conditions – this will entail an intensification of cloud- and precipitation-forming processes. Extreme events such as heavy rainfall and persistent rain might therefore increase. Given that such events occur seldom and with high variability, trends have so far not been statistically relevant. However, there is evidence for the past 20 years that there has been a slight increase in respect of heavy-rain events. Especially in warm years, extreme convective precipitation events have occurred repeatedly (cf. Precipitation extremes). Such developments influence the risk of flooding.

Impacts of climate change

Impact: FiW-I-1 Claims ratio and combined ratio in homeowners’ comprehensive insurance

Physical climate risks resulting from extreme weather events and long-term changes in climatic conditions can have major impacts on the business activities of financial services providers. Underwriters, in particular, incur high demands for damages resulting from extreme meteorological events. Whether an insurance segment is profitable can be seen from the so-called combined ratio. The homeowners’ comprehensive insurance, whether with or without the inclusion of damage from natural hazards, is generally regarded as a less profitable segment. Even individual regional extreme events can have adverse impacts on nationwide profitability values in this insurance segment.

Adaptations – activities and results

Response: BAU-R-4 Insurance density of extended natural hazard insurance for residential buildings

The inclusion of insurance cover for natural hazards (eEV) complements a home-owner’s comprehensive insurance which provides cover for impairments such as storm and hailstone damage – by including floods, heavy rain, snow load and avalanches. Extensive insurance protection from such kinds of damage is an essential requirement for risk transfer to function well. The insurance density in respect of eEV has increased steadily and significantly since 2001. However, this density still remains low, so that many kinds of damage from extreme events are not covered by insurance.

Response: FiW-R-1 Public awareness of storm and flooding risks

Despite the startling extreme events of recent years, the risk awareness among Germany’s population remains low. As indicated by representative population surveys conducted within the framework of a regular study entitled ‘Environmental awareness in Germany’, not even a quarter of respondents expect that their house or home is at genuine risk of damage from storms or floodwater. Appropriate risk awareness is an essential prerequisite for increasing the willingness to take out an appropriate insurance policy.