Preparing for the rising tides

7 August 2014 —
Flood damage could exceed EUR 11 billion a year in Europe by 2080, a study released by the European Commission recently warned, while the number of people affected by droughts could increase sevenfold, and coastal damage from sea level rise could triple. The southern region of Central Europe, where damages could rise from the present EUR 2 billion/year up to EUR 5.2 billion/year and Southern Europe, which would also experienced a considerable increase in damages totaling up to EUR 1.3 billion/year are among the most potentially affected regions under the simulation scenarios used in the EC study.

In addition, if no significant measures are taken to control the climate change, Europe would probably have to bear the loss of about 200,000 lives a year.

The weather events from 2014 in the Central and South-Eastern Europe seem to prove the EC's estimations, despite their openly declared high degree of approximation. In the end, this reality may be confirmed sooner than expected.

In May, an unusually heavy rainfall led to substantial floods in Serbia, Bosnia-Herzegovina and Croatia. Damages and economic losses amount to around EUR 2 billion in Bosnia and Herzegovina and EUR 1.5 billion in Serbia. Three months later heavy rains poured again over western Serbia and in central and northern Bosnia, damaging roads, bridges and hundreds of homes. Total loss for the two countries was estimated at some EUR 3.5 billion.

The torrential rainfall and floods that hit Bulgaria by mid June have significantly affected the country as beside crops and homes, there were reported large infrastructure damages and significant losses in the seaside touristic area, potentially reducing the number of tourist for the following months. "Tourism accounts for about 10% of Bulgaria's GDP," stated a Bulgarian official. One month later an unprecedented hail storm hit the Bulgarian capital city Sofia, also causing significant losses.

The other countries in the region also experienced severe floods, with significant losses both in terms of property damage and human lives.

Still, despite the increasing risk of floods and storm damage, not to mention the other catastrophic risks, property insurance in the region remains at a low penetration rate. Even in Hungary, the country with the highest rate of insured homes in the region, 75%, the number of home insurance contracts decreased by almost 100,000 over the last three years, falling below 3 million.

Thus, it is worth asking ourselves, which is the current status of the property insurance business in the region and which are the perspectives? We will make the first attempt to answer this question in the forthcoming inaugural issue of the XPRIMM Property Report (FY2013 - CEE, SEE & CIS) which will be officially launched on October 8th, at the XIth International Catastrophic Risks Forum in Bucharest.

Keep in touch!

Daniela GHETU

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