Insurance protection for municipalities: Now it's getting risky!

Insurance protection for municipalities: Now it's getting risky!

A current study by the University of Hohenheim, commissioned by the General Association of the German Insurance Industry (GDV), highlights a worrying fact: the insurance protection of municipal buildings against natural hazards in Germany is inadequate. This is particularly worrying as many communities rely on government assistance in the event of damage, which is considered risky.

The study covers several federal states, including Baden-Württemberg, Hesse and Thuringia. In these regions, a large number of communities have taken out natural hazard insurance: 70% in Baden-Württemberg, 55% in Thuringia and only 50% in Hesse. For historical reasons, the insurance density in Baden-Württemberg is 94% for residential buildings, significantly higher than the national average of 57%.

Insurance use and state dependence

The study shows that 31% of municipalities in Hesse, 48% in Baden-Württemberg and 60% in Thuringia tend to finance uninsured damage through state payments. Despite the advantages that arise from quick claims settlement and advisory services from insurers, these factors do not lead to a higher rate of taking out natural hazard insurance. A clear trend shows a supply gap in Germany when it comes to protection against natural hazards.

It is emphasized that consumers and municipalities can obtain information free of charge about their individual risk situations, for example through a flood check. In order to improve the situation, the study calls for a comprehensive concept for prevention and adaptation to the consequences of climate change. This includes clear guidelines for risk-conscious planning and construction as well as building bans in flood areas and the introduction of a nationwide natural hazard certificate.

Rising insurance premiums and risks

The Research by CORRECTIV points out that the climate crisis is leading to rising prices for natural disaster insurance. Particularly high premiums must be paid for buildings in risk areas such as gyms in valleys or town halls on coasts. According to estimates, only around 50% of municipal buildings in Germany have insurance against natural hazards, which leads to risk aversion in some vulnerable circles due to high costs.

In addition, Philipp Wolf from the Rhineland-Palatinate Consumer Center warns of the consequences of rising costs. These could lead to both districts and private individuals foregoing insurance. Natural hazard insurance is becoming increasingly important to protect against financial damage caused by natural disasters such as floods or heavy rain. Given the high construction costs and more frequent extreme weather events, prices have risen significantly in recent years.

A survey shows that only nine out of thirteen districts surveyed have comprehensive insurance. However, four districts, including Oberhavel, Anhalt-Bitterfeld, Gera and Kiel, sometimes have no natural hazard insurance at all, with Kiel citing the high premiums as the reason, while Gera sets priorities for other expenses. There are particular challenges in Bad Neuenahr-Ahrweiler, where offers for natural hazard insurance are no longer available after the flood in 2021.

demands on politics

SPDF MP Johannes Fechner is calling for a uniform premium structure and comprehensive insurance against natural hazards. He suggests rethinking the risk assessment of houses to enable cheaper prices. He also calls on municipalities to take climate adaptation measures and ban construction in the most vulnerable areas.

Another report from Deloitte shows the central role of the insurance industry in the context of the Paris Climate Agreement. The industry not only needs to absorb economic damage, but also support the transition to renewable energy.’étude points out that insurance coverage is often only taken into account after the project has started, which works against effective climate change risk management. The key finding is that combining risk, engineering and financial skills is crucial for successfully tackling future challenges related to natural disasters.