20 years on from the devastating floods which had a large impact on Germany's and Austria's economy and became the costliest natural disaster event on record in the Czech Republic, Aon has published an analysis that is looking back on the event and how flood models have evolved to provide better risk management.

According to Aon data, "even though windstorms remain historically the costliest natural peril for insurers in Central Europe, the largest overall economic losses in the region are caused by flooding." The main cause identified by the analysts is the significant protection gap, where many homeowners are not insured against flood. For example, the German Insurance Association (GDV) notes that only 50% of properties in Germany are insured against flooding as of 2022.

Large flooding events in Central Europe have had the potential to cause a paradigm shift in how we look at flood protection, and also how we approach risk in the insurance industry. One such event was the destructive 2002 flood in the Elbe and Danube River basins, which remains the costliest natural disaster on record in the Czech Republic. It was also the costliest event in Germany until the disastrous floods of July 2021 and remains the costliest flood on record in Austria, Aon said.

The analysis article concludes: "Including climate change scenarios for various time horizons, along with adaptation measures, is a crucial part of flood model development in a time of rapid changes of climate and hazard behaviour. Impact Forecasting pioneers physically robust and complex modelling of flood risk under climate change, utilizing latest science and translating it into losses on a company portfolio directly in probabilistic analyses."

Read the full article "August 2002 Floods - Lessons learnt after 20 years" on the Aon website here.

[s|marketsandtrends]