Risks from floods, storm surges and flash floods

Flood risks on the rise

Underestimated natural hazard, devastating damage

Floods regularly cause devastating damage, with losses running into multiple billions. In 2021 alone, flooding accounted for US$ 90bn in losses, US$ 20bn of which were insured. Moreover, the latest catastrophic flooding in Central Europe in July 2021 was the costliest natural catastrophe in modern European history and, with estimated overall losses of US$ 54 bn (€46bn), the costliest flood event globally of all times.

Losses caused by flood events 2021: Only some 22% were insured

Overall losses: US$ 90bn

In the long term, only storms cause even more losses worldwide than floods. What’s more, climate change is increasing the probability of extreme precipitation in many regions, which will lead to more frequent flash floods and disastrous flooding.

The comparatively low share of insured flood losses even in industrialised countries is partially due to a limited range of insurance covers in some regions and low demand, even in places known to be at risk of flooding. In addition, many losses involve public infrastructure – such as roads, railways, dykes, riverbeds and bridges – which is usually uninsured.The comparatively low share of insured flood losses even in industrialised countries is partially due to a limited range of insurance covers in some regions and low demand, even in places known to be at risk of flooding. In addition, many losses involve public infrastructure – such as roads, railways, dykes, riverbeds and bridges – which is usually uninsured.

Climate change is exacerbating the risk situation

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US$ bn
Floods and landslides in Thailand in 2011 resulted in the highest flood losses of all time

Rising temperatures of the atmosphere and sea surfaces are influencing precipitation patterns. Warmer air can absorb more moisture, which increases the potential for heavy rainfall. Numerous scientific studies analysed by the Intergovernmental Panel on Climate Change (IPCC) indicate a likely rise in extreme flash floods and river floods in many regions. Scientists believe that climate change is also at least partially responsible for the sheer scale of the latest catastrophic flooding in Europe, following on the heels of extreme rainfall in July 2021 that mainly hit Germany.

At the same time, flooding is regarded as the natural hazard against which precautionary measures are most effective. In several regions, like China, there are indications that protective measures have reduced adjusted losses.

Precautionary measures

More frequent heavy rain means that flash flooding in cities far from major rivers is increasingly becoming an issue. But risk awareness remains far too low in many places. As people underestimate the financial risks, they frequently do not have adequate insurance coverage. Homeowners and business owners must then bear the costs of property losses and business interruption losses themselves. Alternatively, they have to hope that state aid programmes will provide disaster relief.

Flooding from an insurance perspective

Floods have various causes, for which there are often individual forms of cover. Each insurance product is tailored to a specific risk situation. There are three main types of flooding: storm surges, river floods and flash floods. There are also many unusual cases, including groundwater flooding, tsunamis, dam-break flows, glacial lake outburst floods, backwater floods, debris flows and mudflows.

River floods

Storm surges

Although storm surges affect just relatively narrow strips of coastline, they have huge loss potential and have generally claimed more victims than any other flood event. As climate change causes sea levels to rise, the risk of storm surges and erosion along many coastlines around the world is increasing. But investments in vastly improved protective measures and, in particular, the advancement of forecasting and early-warning solutions in recent years have reduced the impact of storm surges.

Flash floods

Flash flooding occurs when the ground stops absorbing water during brief but torrential rainfall. Thunderstorms often cause flash floods. On sloping terrain, this can trigger a rapidly rising flood wave capable of quickly flooding dry land where it has not even rained. On flat terrain, the floodwater accumulates in lower-lying hollows, basements and underground car parks. The potential for erosion and the mechanical forces associated with the high rates of flow both play crucial roles, as they can make buildings collapse and cause enormous losses.

Many people are unaware that flash floods can occur almost anywhere – even far away from rivers. In addition, it is nearly impossible to predict flash flooding. This makes short-term loss reduction measures essentially impossible.

More about flooding

Prevention and insurance solutions for water-related risks

Accurate risk assessments based on precise flood zones are needed to calculate insurance covers. A combination of preventive measures and insurance can minimise the overall financial burden.

To protect against flooding, many dykes, flood walls and retention basins are built along rivers. Loss prevention at an individual level involves measures to improve the flood resilience of buildings and structures. Natural hazards insurance is the ideal way to counter the risk of flooding far from rivers and coasts. Nevertheless, policies should primarily cover the losses that can severely hit or even ruin policyholders. At the same time, such insurance must not reduce their willingness to take suitable precautions