Cars on the federal highway 265 following the Ahr valley flood
Photo: dpa / Marius Becker
Natural disasters caused significantly more damage worldwide last year than in the two previous years. Storms, floods and other natural hazards caused damage amounting to 280 billion dollars last year, as the reinsurer announced on Monday.
Around 10,000 people were killed in the process. According to preliminary data, storms, floods, forest fires and earthquakes destroyed values equivalent to around 250 billion euros, as the reinsurer Munich Re announced on Monday in Munich. In the previous year, the damage had amounted to 185 billion euros, in 2019 just under 150 billion. However, according to the statistics portal Statista, the damage in 2005, 2011 and 2019 was significantly higher. The most expensive year so far was 2011, when the seaquake, tsunami and the subsequent nuclear disaster in Japan drove the global economic damage to 355 billion dollars.
A very high proportion, more than half of the financial damage, occurred in the USA in 2021: tornadoes, hurricanes and a cold spell made up 145 billion dollars. In Belgium, the Netherlands and the Federal Republic of Germany, heavy rainfall in July caused unusually severe flash floods with locally devastating damage, especially in western Germany – as was the case with the Ahr flood. More than 220 people were killed. “It was the most expensive natural disaster in Europe to date,” writes Munich Re. The total damage amounted to 46 billion euros, 33 billion of which in Germany alone. The insured portion was relatively low because of the uninsured infrastructure damage and the low insurance density for floods: According to the Association of the German Insurance Industry (GDV) it amounted to 8.2 billion euros nationwide.
In the affected regions, due to the low pressure area »Bernd«, it had rained more heavily than otherwise only regarding once in 100 years. “With rising temperatures, weather extremes will continue to increase, depending on the type and region,” says chief climatologist Ernst Rauch, pessimistic regarding the future. Munich Re has had its own scientific research department for decades. “The risk of natural disasters and the damage resulting from them increase due to climate change,” warns Rauch, “the longer we as a global community fail to combat it.”
But human work is also responsible for the increasing amount of damage in other areas. Sophisticated modern technology increases the value of infrastructures and real estate, which explains the amount of damage in the USA. In addition, the trend, which has long been denounced by the Munich insurance experts, of settling in endangered areas continues. For example, the volcano Cumbre Vieja in the south of the Canary Island broke out on La Palma in September, not surprisingly. Lava flows poured into the sea and buried around 3,000 houses. Severe volcanic eruptions and earthquakes in 2021 showed that “these natural hazards must not be neglected either,” according to the company that used to trade as Münchner Rückversicherung.
Economically, reinsurers are on a lucrative path. Increasing customer premiums cover the increasing risks. For the full year 2021, the management board is therefore expecting a strong profit of 2.8 billion euros. Swiss Re and the German company Hannover RE reported similarly strong results despite high losses.
The world’s largest reinsurance group criticizes the often insufficient reaction of governments. There were still no roadmaps in almost all regions of the world for achieving the climate targets set in 2015. In order to cope better with natural disasters, a structured risk management with clearly regulated responsibilities is necessary at the state level.
This criticism is also likely to target those politically responsible in Rhineland-Palatinate, North Rhine-Westphalia and in the federal government, who reacted too late or incorrectly to the summer floods. At the state level, individual departments often only deal with risks within their area of responsibility. “Holistic responsibility, on the other hand, is often lacking.” Disaster risk management therefore often fails due to unclear responsibilities in the countries concerned, explained Munich Re’s CEO, Joachim Wenning. In addition to possible political improvements, he justifies his cautious optimism with the hope of “technological leaps”, such as CO² reduction.
Whether the financial sector should actually play an important role in the climate transformation – as an investor and risk taker – as Wenning wishes, is quite controversial. The EU is also increasingly using the financial system to steer climate-protecting investments.
The so-called insurance density remains a particular risk factor. On a global scale, around 43 percent of the losses were insured in 2021, 57 percent were not. In industrialized countries, this insurance gap has narrowed in the past few decades, while in poorer countries it remains at more than 90 percent. In industrialized countries, the proportion of insured damage depends on the respective natural hazards. In the USA, as in Europe, the insurance density is significantly lower in the case of floods than in the case of storms. Infrastructure is partially insured in North America, but hardly in Europe.
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