Munich Re logo
Not if, but how

Explore Munich Re Group

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

Risks from floods, storm surges and flash floods
© Cameron -/

Flood risks on the rise

Greater loss prevention is needed

    alt txt



    Each year, floods destroy assets worth billions of dollars. In the last five years alone, losses from flooding worldwide amounted to US$ 300bn, of which roughly US$ 45bn was insured.

    The costliest flood disaster in history occurred in July 2021 in central Europe, when devastating flash floods in western Germany and neighbouring countries resulted in overall losses of US$ 54bn (€46bn). It was also the costliest natural disaster of any kind in Europe for decades.

    Flood losses 2018-2022: Only some 15% was insured

    Overall losses: US$ 299bn

    From a long-term perspective, only storms cause greater economic losses worldwide than floods. Just a small portion of the losses are insured – and not just in poorer countries. The bulk of flood risks in industrialised countries are not insured either.

    The comparatively low share of insured flood losses – even in industrialised countries – is partly due to the limited range of insurance covers in many regions of the world. But a lack of demand also plays a role, even in regions that are known to be prone to floods.

    In addition, many losses involve public infrastructure (such as roads, railways, dykes and bridges) that is generally uninsured.

    Is climate change increasing the risk?

    Climate change is increasing the probability of extreme precipitation in many regions of the world. More frequent flash flooding and flood disasters are the consequence. Rising temperatures in the atmosphere and warming sea surfaces are also influencing precipitation patterns. Since warmer air can absorb more moisture, this increases the potential for heavy rainfall. Numerous scientific studies analysed by the Intergovernmental Panel on Climate Change (IPCC) indicate a likely rise in flash floods and river floods in many regions of the world.

    Scientists have also analysed the catastrophic flooding in Europe in the wake of extreme rainfall in July 2021, which affected Germany in particular. They believe that climate change was at least partially responsible for the disaster. The same conclusion was reached for the flooding disaster in Pakistan in 2022 following severe monsoon rains, with estimated losses of at least US$ 15bn – an enormous amount given the size of the country’s GDP. Researchers estimate that, as a result of climate change, the intensity of this event has increased by half compared to a world without global warming, and believe that it will continue to rise in the future.

    Yet flooding is regarded as the natural hazard against which precautionary measures are most effective. In Europe, for instance, the overall trend in losses (after adjustment for increases in values) has fallen – despite repeated severe floods, such as those in 2002 and 2013. In other regions, too, there are indications that protective measures have reduced adjusted losses.

    Preventive measures

    More frequent heavy rain means that flash flooding in towns and cities far from major rivers is increasingly becoming an issue. Risk awareness remains much 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 – or hope that state aid programmes will provide disaster relief.

    What types of flood are there?

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

    River floods usually build up gradually – although they can sometimes happen very quickly. They usually last several days or even weeks. The area affected will depend on the topography and can be as much as several thousand square kilometres if a river valley is flat and wide. In narrow valleys, flooding is limited to a fairly compressed corridor along the river. Many more people are injured or killed in such scenarios due to the flash flood nature of the events.

    Accordingly, a detailed risk assessment based on exact flood zones is needed to calculate insurance covers. The combination of preventive measures and insurance can help minimise the overall financial burden.

    Although storm surges usually only affect relatively narrow strips of coast, they have huge loss potential, claiming more victims in the past than any other type of 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.

    On the positive side, investment in greatly improved protective measures and, in particular, advances in forecasting and early warning solutions have managed to reduce their impact in recent years.

    Flash flooding occurs when the ground stops absorbing water during brief but torrential rainfall. It is frequently associated with thunderstorms. On sloping terrain, this can produce a rapidly growing flood wave, which can spread at incredible speed into areas where it has not even rained. Critical factors include the mechanical forces resulting from the high rates of flow, and mud or flotsam that is swept along by the waters. Both can lead to buildings collapsing, resulting in an enormous increase in losses.

    One aspect that is often underestimated is that flash floods can occur virtually anywhere, even a long distance from any watercourses. As a result, they are virtually impossible to predict, which more or less rules out short-term loss reduction measures. For this reason, general precautions and greater awareness of the risk of flash floods are hugely important.

    Prevention and insurance solutions for water-related risks

    Dykes, flood walls and retention basins are often built along rivers to protect against flooding. Loss prevention at an individual level involves taking appropriate steps to improve the flood resilience of buildings. A natural hazards policy is the ideal way to counter the flood risk far away from watercourses. Nevertheless, policies should primarily cover losses that could severely affect or even ruin policyholders, yet without reducing their willingness to take suitable precautions.

    Reinsurance solutions

    Industry solutions

    Contact our experts
    Tobias Ellenrieder
    Senior Consultant Flood Risks
    Ernst Rauch Portrait
    Ernst Rauch
    Chief Geo & Climate Scientist
    Climate Change Solutions Department