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Low-pressure system Bernd caused extensive damage

Global warming has been causing more and more natural disasters over the years, resulting in insurers and reinsurers facing mounting costs. As a result of this development, Allianz – a German multinational financial services company – is increasingly focussing on risk advice as well as on a more appropriate distribution of costs.

Flooded roads, collapsed houses and towns that were cut off: storm “Bernd” left a trail of destruction in parts of Germany.

Credits: Allianz, istockphoto/J.Picture/Bilanol

The consequences of climate change are obvious: global warming and sea levels are rising and the ice in the Arctic is melting. Moreover, natural disasters such as heatwaves, floods and storms are on the increase. According to details published by the world’s leading reinsurer, Munich Re, such events caused damage to the economy to the tune of 270 billion U.S. dollars in 2022, of which around 120 billion dollars were apparently insured. This amount roughly corresponds to the figures and experience of Allianz, one of Europe’s biggest insurers. “At the beginning of the millennium, the insurance industry was settling claims of between 77 and 80 billion a year. However, in the past few years, this sum has risen to more than 100 billion per annum and has become the norm,” stated Jürgen Wiemann, Head of Property Underwriting at Allianz Commercial, the arm of Allianz dealing with industry and corporate insurance.

This year, according to Swiss Re, the large number of tornadoes in the USA alone caused a worldwide insurance loss of a record 60 billion dollars. “We are less prone to tornadoes in Germany. Nevertheless, there has been a rising trend in the number of extreme weather events, which result in extensive damage to buildings and infrastructure,” continued Wiemann. The largest insured loss that the German insurers have covered to date resulted from storm “Bernd” and was around eight billion euros. In the summer of 2021, this led to severe flooding, especially in the states of North Rhine-Westphalia and Rhineland-Palatinate. Many will have bad memories of “Bernd”, primarily the flash flood in the Ahr valley, which resulted in many deaths and devastated residential areas and factories.
However, the range of so-called secondary dangers, in which Allianz has seen a significant increase over the past few years, is not limited to floods and tornadoes. “There has also been a significant rise in the amount of damage caused by hailstorms, forest fires and droughts recently”, said Wiemann.

Tornadoes cause havoc, especially in the USA. They can occur anywhere in the world where torrential rain and heavy thunderstorms occur.
From an insurer’s perspective, it is extremely important “not to simply follow the trend in losses, but rather to put a package of measures in place, comprising prevention and adapting to climate change, as well as in distributing the ensuing costs fairly”. As regards the first point, Allianz Commercial has been focussing for several years on risk counselling, i.e. providing its customers with advice on risks. This means, for example, discussions on what construction measures should be adopted in advance by companies and factories to protect their property effectively against possible natural disasters. “Very topical is the question of the best possible type of roof to put on company buildings to protect against damage caused by extreme rainfall or the weight of snow,” reported Wiemann. The term business continuity management is particularly relevant in this respect and involves preparing company-specific emergency plans and checking, on a regular basis, that they work. The insurer has its own network of more than 100 risk advisors. They provide abundant support to policyholders who have questions on all related topics. This covers a vast range of technical and scientific aspects and analyses how the risk situation changes due to climate change and what countermeasures can be adopted.

However, to what extent can these risks actually be planned and financed? Numerous German insurers have been warning for quite some time that climate change could result in higher premiums for insurance policies. Some insurance companies even see the risk of having to shut down in the long term because the climate risks will simply be too high. Against this background, insurance experts are calling, for example, for climate-related developments to play a greater role during the planning and building phases, and for a ban to be imposed on construction projects in flood plains. Wiemann is also in favour of this idea and commented on the financial situation, as follows: “We, too, are a commercial operation, hence insurance premiums must be adequate to pay for any losses incurred. In this respect, it is up to us, along with the reinsurers, to find joint solutions and to manage everything in our portfolio well. Nevertheless, we need to speak openly about spreading the costs fairly that takes the policyholder into account.” He doesn’t see Allianz’s withdrawal from parts of industrial insurance as an issue. “However, we expect that there will be fewer policies covering natural disasters in the long term,” Wiemann concluded. (bre)


Jürgen Wiemann, Leiter Underwriting Property bei Allianz Commercial

“Here in Germany, too, the number of extreme weather events is on the rise.”

Jürgen Wiemann, Head of Property Underwriting
at Allianz Commercial


Allianz Group Commercial

Trading: in Germany since 1890
Employees: Approx. 160,000 worldwide
Main business: Property, life and health insurance as well as industrial insurance and reinsurance, investments
Turnover in 2022: approx. 153 billion euros

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