German Floods Show Climate Change Challenge for Homeowners Insurers

Analysts at Moody’s have labelled the recent catastrophic flooding in Germany as a ‘consequence of climate change,’ and warned that German insurers could find it challenging to protect homeowners against climate risk in future without significant price increases.

The floods, which impacted the southern part of the German federal states of North Rhine-Westphalia and Rhineland-Palatinate, caused severe damage to residential and commercial property as well as general infrastructure, with insured losses estimated at €4-5 billion by the GDV.

Economic losses are expected to be even higher, reflecting damage to general infrastructure, as well as the protection gap in the homeowners market, as many home insurance policies do not cover rainfall-induced flooding.

Moody’s believes that the floods will affect various insurance business lines, with homeowners’ and household insurance hit hardest because of extensive damage to houses and their contents.