5 questions about climate insurability

The AFM has today published the report 'The influence of climate change on non-life insurance'. The regulator emphasizes that the damage is increasing, but also that insurers can use help to keep the insurability as high as possible. What risks are we talking about? Timo Brinkman, Climate Policy Advisor at the Dutch Association of Insurers, answers five questions.

1. The figures mentioned by the Netherlands Authority for the Financial Markets in the report are shocking. Last year, for example, there was 190 billion dollars in damage caused by natural disasters worldwide, of which 'only' 81 billion was insured. Are climate risks still insurable in our country?

"The climate is changing rapidly and with it the risks and the damage burden. Storms, hail, forest fires, precipitation and local flooding are insurable. As a sector, we can also cope with this in the coming decades, but if we want to keep the premiums manageable, we must fully focus on prevention and early warning systems. In Australia and the US, premiums in risk areas are already sky high. These may be extreme examples, but we also have to think about our building policy now in order not to be stuck with the baked pears in the future. It is not only about the question OF WHAT we build, but especially WHERE and HOW we do it. For example, floodplains and very low-lying polders are still being built. I don't think that's smart. And I hope that as many other people as possible will be rebuilt in Limburg."

2. Flooding is one such risk that insurers have long been saying they can't cover on their own. What can the government do to help?

"Just for the record. Then it is a flood of the sea or a large river. Insurers can easily cover local floods themselves. However, if a large river such as the Meuse floods or the North Sea floods, insurers may not be able to cover that damage. The government can do roughly two things to help insuring flood risk. The first is to clarify the Wts (Disaster Damage Compensation Act), which also came into force after the flooding in Limburg. After all, if it becomes clearer what the government does and does not pay out, insurers can develop additional products. The second option is for the government to give permission for a pool construction, so that insurers can better distribute climate-related risks. If I could sum it up in my own words, I would say that the climate requires more solidarity."

"The climate requires more solidarity"

3. And what about subsidence? If I want to insure my house against a subsidence, I can't. Why not?

"Because we already know exactly which houses will sink. In other words, it is no longer an uncertain incident. If you look at bodemdalingskaart.nl or klimaateffectatlas.nl you can see that there is already so much data available that we can 'predict' exactly where the risks are. This is really a billion-dollar risk for homeowners and their mortgage lenders and municipalities. My colleagues from mortgages, together with others such as vereniging Eigen Huis, are also sounding the alarm to the government about this: there must be a national programme."

4. Solar panels can still be insured, but for how long? Are they also in danger of becoming uninsurable?

"No, on the contrary I would even say. On the contrary, they are becoming more and more insurable, because we are building up more and more knowledge. With solar panels, there are two major risks: fire and damage from extreme weather. Research shows that the correct installation and use of better materials poses fewer risks. In recent years, it has sometimes been difficult (and at very high cost) to determine whether damage to loss of yield was caused by hail or by the material and damage during construction. This in turn has led to insurers sometimes excluding loss of yield from coverage. I would therefore advise anyone who wants to install solar panels on their roof to first be well informed and to make clear agreements. Research by Hans de Moel also shows that you can prevent a lot of damage if you install solar panels at a certain angle and wind direction, so that the chance of extreme hail damage is smaller."

5. In the report , the AFM focuses mainly on insurers and their products. Is there also a role for the insurance advisor when it comes to climate and insurability?

"I think it is right that the AFM zooms in on the insurability of climate change. The offer is still leading. I also share the conclusion that awareness in our country must be raised. It is precisely there that the intermediary can play a role. Especially when it comes to complex risks, because because we know more and more, there is also more and more to choose from. For example, an entrepreneur in Limburg can easily insure himself against a flood of the Geul on the provincial market. However, I know of cases of recent flooding in which, together with the advisor, the lowest price on the (international) market was chosen and insufficient attention was paid to the risk and coverage. The disappointment afterwards could therefore have been avoided. I would therefore like the climate to be included as standard in the training package of an insurance advisor. If we want to achieve a real breakthrough in the consciousness of our customers, we will really have to do it together."

Read what else insurers are doing in the field of climate