Sure, climate change is not directly to blame for the flood disaster this summer in Rhineland-Palatinate and North Rhine-Westphalia. But global warming will make such disasters more common. The risks of nature are changing and are becoming more difficult to calculate. The alarming images from the devastated communities in the Eifel make it clear to everyone what that means.
It is not only about immediate help for the flood victims, but also about long-term consequences: renaturation of rivers, flood protection and warning systems whose messages those affected understand and take seriously. And it will be about making better provisions for material damage. That is why politicians, scientists and lobbyists are now discussing whether all homeowners should not be obliged to take out insurance not only against fire and storms, but also against water damage. So in Germany, as is already the case in France today, does it have to be compulsory insurance against natural hazards?
The question of whether and how people or property should be insured is one of the central issues of economics. British historian Niall Ferguson writes: “The history of risk management is a long struggle between our futile need for financial security (in the future) and the harsh reality that there is no such thing as ‘a future’ in the singular. It are just different, unpredictable futures that will never cease to catch us off guard. ” Good insurance was at the beginning of the European welfare state – from the widows ‘and orphans’ funds in Scotland in the 17th century to social security and the general local health insurance funds in the German Empire.
Good insurance is also necessary to deal with growing natural risks. What bad insurance can do was shown in August 2005 when Hurricane Katrina and the subsequent flood devastated large parts of the city of New Orleans. With $ 60 billion insured damage, Katrina was the most expensive natural disaster ever recorded (in Germany it should be at least five billion euros this year). Three-quarters of New Orleans’ buildings were damaged or destroyed.
The problem with this: Storm damage was insured by private companies, while flood damage was taken care of by a state insurance company. What led to it, writes Ferguson in his book The Ascent of Moneythat after the disaster, thousands of insurance agents moved through the affected states of Louisiana and Mississippi. “Their job was not to help the insured but to avoid payment by claiming the damage was from the flood and not the storm.” In the end, the American state had to pay $ 109 billion, three times the estimated losses to insurance companies. Large parts of the Gulf Coast were then considered uninsurable, especially those communities where many poor people lived.
After all, the industry has “learned essential lessons” after Katrina, says Ernst Rauch, chief climatologist and georisk researcher at the reinsurer Munich Re. This included advances in the modeling of tropical cyclones and prevention, for example through better dykes, barriers and pumps, more stable structures and compensation areas. “What is essential is improved physical and financial resilience to such storms and related floods.”
So far, the state has always had to help with a lot of money in disasters – not very efficiently
Despite everything, heavy rain in the Eifel is much less destructive than a hurricane in the Gulf of Mexico. The premiums for insurance against natural hazards are therefore only a tenth of what would have to be paid in Florida, for example. But risks and costs will grow. This year’s flood is the worst natural disaster in Germany since the Hamburg storm surge of 1962. Only 46 percent of buildings nationwide are insured against flood damage. So there is a lot to be said for acting now and making insurance against natural hazards compulsory.
You can then argue about the details. Should the insurance be “solidarity” in the sense that every owner pays the same premium, regardless of how high his specific risk is? No, says Ernst Rauch from Munich Re: “The premiums must not all be the same, but must correspond to the different risks. Otherwise there will be false incentives”.
Daniel Osberghaus, economist at the Center for European Economic Research (ZEW) in Mannheim, calls for a “strategic approach” for dealing with natural risks. So far, the state has always had to help with disasters with a lot of money – as is now the case in West Germany. But that is not necessarily efficient. In addition, the state sees itself caught in the “Samaritan dilemma”. The term comes from the American Nobel Prize winner James Buchanan and describes a situation in which someone helps someone in need with the best of intentions, but thereby robs them of the incentive to help themselves.
Osberghaus advocates compulsory insurance for everyone. It must contain a deductible and be mandatory for both sides: the insurers are not allowed to refuse anyone. To do this, there must be a disaster fund that is financed from tax revenues. It would cover part of the damage to existing buildings in high-risk areas, for example in Passau’s old town. “Otherwise the buildings there would be uninsurable and would have to be abandoned. Nobody wants that.”