Munich Re logo
Not if, but how

Explore Munich Re Group

Get to know our Group companies, branches and subsidiaries worldwide.

Increasing and changing weather risks call for risk management adjustments



    alt txt



    Individual households and industry are finding themselves increasingly exposed to changing weather risks. This is partly due to a greater frequency of persistent weather patterns in Europe, involving long periods of dry weather or precipitation, that may lead to droughts or river flooding. The number of loss occurrences resulting from severe weather events is also on the rise. In addition to higher direct losses, this may cause companies whose income is dependent on the weather to sustain a significant loss of earnings.

    The number of weather-related natural catastrophes worldwide that have resulted in losses increased roughly threefold in the period 1980-2013. Likewise, the number of convective (thunderstorm) events in Europe more than tripled over the same period. Heavy summer storms accompanied by hail have become much more frequent, partly because the water content in the atmosphere is increasing. The world's costliest insured weather loss in 2013 was a hailstorm in Germany with an insured loss amount of €2.8bn (overall loss: €3.6bn). In June 2014, convective storm Ela caused economic losses totalling €2.3bn and insured losses of €1.8bn in Germany, Belgium and Luxembourg. The trend towards such weather patterns is changing the probability and intensity of hail and flash floods, and hence of potential losses.

    Another noticeable trend has been the increased persistence of weather patterns, which may cause heatwaves and droughts under high-pressure conditions in summer, and river flooding during low-pressure systems. This was also the origin of the heavy flooding in Germany, the Czech Republic and Austria in 2013, the year's most expensive weather event with overall losses of €9.7bn (insured loss: €2.4bn). In the United Kingdom, flooding at the turn of the year led to financial losses amounting to €1.1bn and insured losses of €800m.

    Changing weather risks entail higher risk of losses

    The increased frequency and intensity of such loss events is very difficult to predict locally. Moreover, changes in building features – for instance, thermal insulation and solar installations – tend to aggravate claims volatility. "For primary insurers, this means rising income uncertainty and more volatile results", said Ludger Arnoldussen, member of Munich Re's Board of Management. "Changing weather risk patterns necessitate an adjusted perception of risk and bespoke reinsurance protection. We need a better understanding of hazards and potential accumulation risks, and we need to analyse the risk locations in this regard." There are a variety of reinsurance covers designed to protect the balance sheets of primary insurance companies against the uncertainties associated with weather risks, and thus ultimately also their customers.

    Exceptionally persistent atmospheric conditions may even threaten the financial success of companies – for example, energy companies, if a winter is unusually warm and heating energy requirements are reduced. Companies can hedge against such fluctuations in income by purchasing financial instruments directly through Munich Re. Weather risks can be existentially threatening especially for companies with a weaker capital base, particularly if they do not have sufficient know-how of changing weather trends and risks.

    Munich Re has exceptional expertise in assessing and modelling such risks. For 40 years, Munich Re's experts have been analysing global weather and claims developments with the aim of developing effective risk transfer solutions.

    Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. In the financial year 2013, the Group – which combines primary insurance and reinsurance under one roof – achieved a profit of €3.3bn on premium income of over €51bn. It operates in all lines of insurance, with almost 45,000 employees throughout the world. With premium income of around €28bn from reinsurance alone, it is one of the world’s leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. Its primary insurance operations are concentrated mainly in the ERGO Insurance Group, one of the major insurance groups in Germany and Europe. ERGO is represented in over 30 countries worldwide and offers a comprehensive range of insurances, provision products and services. In 2013, ERGO posted premium income of €18bn. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Munich Re’s global investments amounting to €209bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.
    This media information contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.