Land under water — Flood loss trends

Floods are among the most frequent and most costly natural catastrophes. Major floods caused economic losses exceeding US$ 200bn in the 1990s alone.

The summer of 2002 will long be remembered in central Europe as the summer of the hundred-year flood. The floods in the catchments of the Elbe, Danube, and Vltava marked one of the worst flood catastrophes since the Middle Ages. They may be compared with the great North Sea storm surges and the infamous millennium flood of 1342, when nearly all the major rivers between the North Sea and the Mediterranean were flooded.

Besides causing immense human suffering, the events of 2002 generated losses exceeding EURO 20bn in Europe as a whole, including insured losses of EURO 3.4bn.

Floods and loss potentials

Along with windstorms, floods are the most frequent cause of losses from natural hazards. About a third of all loss occurrences and a third of the economic losses worldwide are attributable to the effects of flood. Whereas only six major flood catastrophes were recorded in the 1950s, there were no fewer than 26 in the 1990s. It may be assumed that this figure will increase in the future. However, in the case of floods, unlike windstorm, the proportion of losses that are insured is usually quite low.

Why are flood losses increasing so dramatically?

The principal answer to this question is that more and more people are settling in high-risk areas. Thanks to good transport links, arable soils, and the availability of process and cooling water, coastal and river valleys are very attractive for residential and industrial development. What is more, people have never had so many valuable but at the same time vulnerable possessions, so that the loss amounts generated by flood events are many times higher than in the past. The loss potentials are likely to increase even further in the future.

Global warming leads to floods

It is indisputable that a warmer climate will result in the atmosphere having a higher water vapour content. This is likely to bring larger amounts of precipitation but also more frequent torrential rain in regional severe weather situations. At the same time, the trends of recent decades and the climate models lead us to expect much milder and wetter winters in many regions.

The consequences: the flood risk will increase as precipitation falls more frequently and over larger areas in the form of rain rather than snow, as in the past. Also, the rise in sea levels that is to be expected as a result of global warming will aggravate the risk of storm surges and beach erosion on all coasts of the world.

Strategies against flood losses

Effective loss prevention involves a number of measures. The solutions include revising land use regulations (prohibiting development in flood-prone districts), adopting permanent and temporary structural measures (building elevated structures, waterproofing cellars and buildings), modifying the management of values (avoiding installations or objects which are of great value or susceptible to water in lower parts of buildings), and taking appropriate action in the event of an impending flood (e.g. clearing out threatened parts of buildings).

In concrete hazardous situations, the absolute priority is to retain the water by means of engineering works such as retaining basins, polders, reservoirs, or dykes. At the same time we must realise that it will never be possible to control every possible flood completely, i.e. there will always be a residual risk.

Partnership for risk reduction

Effective flood precautions are only possible if the existing risks are shared between different parties working in partnership: the state (with its responsibility for dyke protection, land use regulations, etc.), the people affected (developing risk awareness, applying private loss prevention measures to the object insured), and the insurance industry (providing compensation for a portion of the losses, enabling quick repairs, etc.). The risk can only be reduced significantly if all the parties in this risk partnership work together.

Hazard zoning models

In the mass business of personal lines insurance, it is impossible to examine each risk in terms of its individual exposure. Because of this, zoning models are a central component in the insurance of flood losses — they supply broad-spectrum risk assessments on the basis of certain key data relating to the specific object. An example of this is the zoning system for flood, backwater, and heavy rain (ZÜRS), with the aid of which a degree of exposure to river flood can be deduced for any address in Germany. These zones determine whether a risk can be insured against flood and at what conditions. This system was put to the test by the floods in the August 2002 — and passed.

A look into the future

"Nature knows no catastrophes, only man knows catastrophes — if he survives." (Max Frisch)

It is not possible to prevent major flood catastrophes from happening in the future. We have to learn to live with floods again. So if we spread out into exposed areas, we must be aware of the attendant risks and of the fact that we will never be completely safe. We must change our behaviour in such a way that we adjust to the risks instead of simply trying to prevent floods from happening.