Insurance Companies Brace for Hefty Damages from Coming Storms in 2024
In an ominous forecast, Jörg Asmussen, the head of the German Insurance Association (GDV), predicts that 2024 will witness higher than average damage from natural disasters. This prediction stems from the current assessment of the damage inflicted by severe weather events this year. If the autumn and winter storms are intense, the overall damage could surge significantly. This damage will affect residential properties, household goods, commercial operations, industrial facilities, and motor vehicles.
The majority of the damage in the first half of the year was caused by floods and heavy precipitation (2.7 billion euros), with June alone contributing 2 billion euros from flood damage in southern Germany. Storms and hail resulted in 800 million euros of structural damage, with additional 400 million euros incurred from storm, hail, and flood-related motor vehicle damages.
Avoiding a vicious cycle of escalating damages and increasing premiums for consumers, the GDV advocates for mandatory climate change adaptation measures. They urge the implementation of nationwide standard guidelines for construction in danger zones, and reduce surface sealing to curb the advancing damages. Asmussen warns, "Without preventive measures, we fear a cycle of escalating damages and rising premiums, which could severely burden consumers' finances."
Insurance providers like GDV-affiliated companies are proactively preparing for a possible elevated loss scenario due to the anticipated higher natural disaster impact in 2024. Asmussen, the GDV leader, emphasizes the need for preventive measures to prevent a vicious cycle of escalating damages and increasing premiums that may strain consumers' finances.
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To mitigate climate change's impact on natural disasters and prevent escalating damages and premiums, several measures are being advocated globally. These measures include:
- Mitigation policies like transitioning to renewable energy, improving energy efficiency, and development of carbon capture and storage technology.
- Adaptation policies include encouraging agricultural and urban adaptation, implementing risk reduction measures, and developing climate-adaptation insurance.
- Insurance innovations such as parametric insurance, climate-adaptation insurance, and risk assessment and pricing models.
- Financial inclusion and public-private partnerships to improve access to insurance in underserved markets, pool resources and expertise, and develop holistic risk management solutions.
These measures aim to lessen the impact of climate change on natural disasters, prevent escalating damages, and ensure that insurance companies can provide adequate coverage while managing the increasing risks associated with climate change.
