Climate change effects could double insurance payouts and premiums by 2050, say German insurers

Damage caused by natural hazards like flooding cost German insurers 5.6 billion euros in 2023, up from four billion euros the previous year, after the country saw one of the wettest and warmest years since records began, according to a German Insurance Association (GDV) report. Without consistent measures to adapt to climate change and strengthen prevention, the association expects homeowners’ insurance premiums to double in the next ten years through the effects of climate change alone.

"The effects of climate change are becoming ever clearer. Cities, infrastructure and buildings must be adapted to the new climate conditions. Bold, far-reaching measures are needed," said Jörg Asmussen, managing director of GDV, an interest group representing private insurers, in a statement. GDV focused on the flood sensitivity of buildings, cities and infrastructure in its 2024 Natural Hazard Report, saying the connection between the "accumulation of flood events" and climate change was clear.

The GDV expects the damage caused by climate change to at least double by 2050. As a result, the losses incurred by insurers will increase, it said. "These losses will have to be offset by increasing premiums in order to be able to pay the claims. In the end, we will be caught in a spiral of rising losses and rising premiums," the report authors wrote.

"We as a society are inadequately prepared,” said Asmussen, calling for a "preventative package of measures consisting of a consistent building freeze in flood areas, the unsealing of surfaces and a nationwide natural hazard portal," Table.Media reported. Any delay in implementing mitigation and adaptation measures would lead to spiralling damage and premiums, the GDV director said.

Germany – and much of central Europe – experienced devastating floods this summer, first in the West, then in the South, then in the East. Insurance companies expect damages from extreme weather events in Germany to amount to at least seven billion euros by the end of 2024. Deadly floods in 2021 resulted in the highest ever claims volume for natural hazards at 12.6 billion euros. In 2023, the government introduced a climate adaptation law, setting a binding framework for action at the national and state levels.