Deluge-ional: Time for smarter collaboration against rising flood risks

Floods – especially those caused by heavy rainfall – can occur anywhere, making them one of the most common natural disasters on our planet. The damage in the wake of these extreme weather events is heartbreaking, with losses running into multiple billions. 

Between 1980 and 2019, flood losses amounted to $1,092bn, of which only 12% were insured1. For those who haven’t experienced it themselves, it is hard to comprehend the extent of the stress and devastation that occurs, not just during the flood, but in the months, weeks, and sometimes years that follow. Floods are unique when it comes to the extent of havoc they wreak, claiming everything on their treacherous paths from homes and valuable possessions to lives and livelihoods.

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Vehicles submerged in raging waters, fields turned to lakes, the mangled remnants of roads and bridges; sadly, these haunting images are all too familiar. In the summer of 2021, the world looked on in disbelief as extreme rains turned into catastrophic floods throughout Europe. While flooding and other extreme weather events have always been part of life on Earth, climate change is exacerbating the situation.

If humanity continues warming our planet at the current rate, increasing rainfall, dryer summers and rising sea levels are likely to increase the risk of disastrous flooding in many areas. According to the Intergovernmental Panel on Climate Change 2021, failure to reduce the amount of carbon dioxide emitted into the Earth’s atmosphere will cause climate conditions unprecedented in thousands, if not hundreds of thousands of years. It is clear that we are living through a climate emergency, and Katherine Wenigmann, natural catastrophe risk expert at Allianz Reinsurance, believes that the situation will continue to worsen. “Events like the 2021 July floods will likely occur more frequently as a result of climate change. A warmer atmosphere can hold more water vapor, which increases the likelihood of heavy rainfall.” In fact, considering a high emissions scenario (4.3°C of global warming), the potential for high rainfall accumulations due to slow-moving storms is projected to be 14 times more frequent across Europe by 21002.

“The flood risk landscape, previously well defined by historical and government flood maps and to some extent local knowledge, is being challenged with erratic and unprecedented weather patterns,” adds Boris Gao, Senior Risk Consultant at Allianz Global Corporate & Speciality. “What we accepted as ‘normal,’ is being challenged by new realities of climate change, rapid urbanization and human development.”
River floods
Caused by high water levels in rivers as a result of heavy and long-term precipitation.
Flash floods
Can occur suddenly and anywhere as a result of heavy rain in a short period of time, during which the ground stops absorbing the rainfall.
Storm surges
Take place in coastal regions. Low pressure areas over the ocean generate high wind speeds that drive flood waves on to land. Hurricanes also fall into this category.

With the scientific knowledge we have at our disposal today, as well as the capabilities of meteorological agencies that are able to forecast flooding events sometimes days ahead of the deluges, why were we unable to avoid the catastrophic situations and losses of recent times?

One reason is that many communities and authorities misunderstand or diminish local risk. As a result, they are caught unprepared to respond appropriately to the impacts of flooding. To make things worse, awareness in many communities remains low. Home and business owners often fail to purchase adequate insurance, leaving them with no one to turn to when disaster strikes. According to a new report commissioned by our daughter company LV= General Insurance, even where awareness is present, people are reluctant to invest in coverage and making their homes flood resilient due to the cost-of-living crisis.

The situation is even worse in socially marginalized and vulnerable populations. “In such communities, recovery from floods is often prolonged and incomplete,” says Daniel Kahl, Ph.D. student at the University of California Flood Lab and finalist in the latest Allianz Climate Risk Research Award. “It is essential to identify such inequalities and develop new tools to address them.”

That all of this has an impact on how insurers do business is evident. “Climate change is changing the way we need to look at physical risk for our customers,” says Holger Tewes-Kampelmann, CEO of Allianz SE Reinsurance. “Our job in the insurance industry is to make sure that we have a thorough and diligent risk assessment in place that goes hand in hand with mitigation actions to keep our business model sustainable.” 

Second place in the 2022 Allianz Climate Risk Award went to Daniel Kahl for his work on combining flood models with population vulnerability. 
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Two things are clear:

  • Climate change is creating risk on an unprecedented scale. While insurers must continue to promote and develop coverage options based on accurate risk assessments in and outside of flood zones, the role of insurance companies doesn’t end there. 
  • Extreme weather events cannot be prevented, but the degree of their impact can be significantly reduced. Preparedness in order to minimize the loss of life and property is key. 

According to Prof. Dr. Michael Kunz, Spokesman for Disaster Management and Risk Reduction at the Karlsruhe Institute of Meteorology and Climate Research, it’s all about increasing resilience. “An essential component of resilience is the risk competency of each individual, which leads to rapid and appropriate actions of the population when a disaster occurs. Acquiring risk competency starts in school but should also be incorporated into the dialogue of different populations and stakeholders – and, of course, in the insurance sector,” says Kunz.

It’s a long-term view shared by Christopher Townsend, Member of the Board of Management of Allianz SE. “Indeed, it is our responsibility as an insurance company to understand local risks, both so that we can sustainably insure them and provide risk advice to society and customers in order to build resilience. This is why our experts around the world research and analyze the risk profiles of natural catastrophes in all countries where we conduct business.”

Ultimately, it is a combination of insurance and preparedness that will protect communities in the long run, especially in the face of a long battle against climate change. For Klaus-Peter Roehler, member of the Allianz SE Board of Management, it’s clear that smart working together is essential. “A viable solution involves a holistic approach; collaboration across science, business and politics, but also right down to the individual level,” says Roehler. “It has to include elements such as individual prevention, intensive flood protection, a rethinking of building and land use planning, warning and rescue systems, as well as insurance solutions for the broad population and their affordability. Political support is essential, especially when it comes to heavy rain and flood risks. Here, stringent restrictions on building in floodplains play a central role, as do flood protection and river basin management.”

Roehler’s comments on building restrictions hold particular relevance in the UK, a country that’s had more than its fair share of floods. In England alone, it is estimated that floods cause £1.1bn of damages per year, and LV= General Insurance pays out £32,000 on average for a flooding claim. In the UK, the risk of flooding is exacerbated not only by climate change but also by the growing need for housing. More development means soil sealing as green spaces are paved over with streets and buildings. Rain falling on these sealed surfaces will run directly into already stretched drainage systems and rivers, further increasing flooding if mitigation measures are not taken. In England, such measures are not required for developments of less than nine houses. The increased risk of surface-water flooding is particularly difficult to digest given that one in six homes in the country are already at risk of flooding, and further highlights the need for a holistic and interdisciplinary approach.

Martin Milliner, Claims Director at LV= General Insurance, says: “ Our recent report highlights significant issues that continue to put an ever-increasing number of communities at risk, and it’s crucial that property developers, insurers and local authorities work together to tackle this important issue.”

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To help draw attention to the impact flooding is set to have in the UK over the next 50 years, LV= partnered with interior designer Gaby Blackman and Flooding Expert Dr Jess Neumann to design a ‘Flood-Proof Home of the Future’. The design showcases extreme features homes of the future would need to have to guard against flood risk. “Clearly, the installation of such sophisticated flood proofing is practically and financially out of the question for most homeowners, so it’s more important than ever we work to combat the problem before such extreme measures become necessary,” says Milliner.

Townsend adds, “The recent work of LV= General Insurance in the UK is exemplary. While we continue working on preparedness and sustainable insurance solutions in response to our changing climate, we must never lose sight of our responsibility to combat global warming. At Allianz, we understand that climate change will severely impact our business and the lives of our customers. We work to integrate climate protection into all our core activities, and systematically consider sustainability criteria in our insurance and investment business.”

The Allianz Group is one of the world's leading insurers and asset managers with more than 122 million* private and corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 714 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.7 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2022, over 159,000 employees achieved total revenues of 152.7 billion euros and an operating profit of 14.2 billion euros for the group***.
* Including non-consolidated entities with Allianz customers.
** As of June 30, 2023.
*** As reported – not adjusted to reflect the application of IFRS 9 and IFRS 17.
As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:
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