This Digital Insurance Forum focused on the pressing issue of insurance against natural disasters. Karel Van Hulle, Professor Emeritus at Goethe University Frankfurt and Catholic University Leuven and ICIR Fellow, highlighted the increasing frequency and severity of natural catastrophes due to climate change and the significant protection gap in Europe. Between 1981 and 2023, Nat-Cat events caused €900 billion in direct economic losses within the EU, with only 25% of these losses being insured. The forum aimed to examine the mechanisms employed by Spain, Switzerland, and Germany to protect against natural disasters.

Spain

Cristina Guerrero from UNESPA explained Spain’s well-established public-private insurance model centered around El Consorcio, a 70-year-old insurance pool managed by the Ministry of Economy. It covers extraordinary risks such as floods, earthquakes, and volcanic eruptions, while private insurers handle lighter weather-related risks. After severe flooding in Valencia, resulting in €4.5 billion in insured losses, El Consorcio successfully processed claims and paid compensation with assistance from private insurers. The institution’s funding comes from a surcharge on insurance premiums, ensuring readiness to mobilize resources when disasters strike. Guerrero emphasized the need to continually revise systems to accommodate evolving climate challenges and implement responsive protocols.

Germany

Oliver Hauner of the German Insurance Association (GDV) described Germany’s market regime, relying on private insurance driven by risk-based pricing. Unlike Spain, no comprehensive public-private framework exists, leaving significant protection gaps. The 2021 storm “Bernd” caused €30 billion in economic losses, with only one-quarter insured. Government relief covered uninsured risks for infrastructure such as roads and bridges, acting as a substitute insurer in many cases. Hauner strongly advocated for public-private partnerships, citing the UK's Flood Re system as a successful model. Prevention and climate adaptation were highlighted as critical, yet political reluctance and inadequate building codes hinder progress.

Switzerland

Monika Mächler of Zurich Insurance Group outlined Switzerland’s dual system: public sector-led cantonal building insurance institutions (GBAs) operating as monopolies in 19 cantons, complemented by private insurance in others. Both systems mandate coverage for legally defined natural disasters. Premiums are pooled and solidarity-based, ensuring affordability. Switzerland’s infrastructure is bolstered by extensive preventative measures, including zoning laws, flood tunnels, and strong building codes coordinated across federal, cantonal, and municipal levels. Despite the debate over uninsurability, the Swiss system has consistently proven effective in mitigating disaster impacts over decades.

Key Takeaways

1. Prevention: All speakers emphasized the critical role of proactive measures, including zoning laws, resilient infrastructure, early warning systems, and adaptation to climate change. Preventative efforts are crucial to reduce damages and maintain affordability of insurance.
2. Public Private Partnerships: While Spain and Switzerland have robust mechanisms integrating public and private entities, Germany struggles with political apprehension toward such partnerships. Cooperation between governments and insurers is deemed necessary to close the protection gap.
3. Affordability and Insurability: Solidarity-based models like Switzerland’s pooled premiums and Spain’s surcharge-funded consortium offer affordable solutions. Germany grapples with affordability amidst rising risks, emphasizing the need for innovative approaches.

The forum concluded by underscoring the urgency of coordinated action to combat the escalating impact of climate-induced disasters. Without effective measures, both insurance protection and quality of life are at risk.