Flood events in 2013 highlight positive effect of defence measures: Munich Re

Despite floods dominating natural catastrophe losses in 2013, a new publication released Tuesday by Munich Re shows that protective measures can drastically reduce losses.

In 2013, 37% of overall losses worldwide from natural catastrophes were flood-related, substantially higher than the 22% average for the period since 1980, note figures in Munich Re’s new publication, Topics GEO – Natural catastrophes 2013. The publication provides statistics and analyses of the most significant events of last year, notes a statement from Munich Re.

The reinsurer points to the June 2013 floods in southern and eastern Germany and neighbouring countries – representing the year’s (and the world’s) costliest natural catastrophe – which resulted in overall losses of €11.7 billion and insured losses of €2.4 billion.

However, the losses were considerably less than the Elbe floods in the summer of 2002, which totalled €17 billion. Flood control structures were a major factor in the lower level of losses in 2013, the statement notes, citing as examples that mobile flood barriers in Prague, Dresden, Bratislava and Budapest were able to withstand the waters.

There were important organizational lessons learned from the 2002 floods.

For example, the Dresden water utility took steps to protect power supplies and launched a crisis management team at the start of the 2013 floods, and the owners of three large apartment blocks in Dresden developed a systematic alarm plan. These moves resulted in the utility’s damage being only about one-quarter of that in 2002, and the apartment blocks halving damage to underground car parks and electrical operating systems, Munich Re notes.

“Flooding is the natural hazard for which protection measures are most effective,” Peter Höppe, head of Geo Risks Research at Munich Re, notes in the statement. “Our loss statistics also show that developing countries in particular can suffer horrendous damage and loss of life from flood events. Just a few measures such as imposing a building ban in highly exposed regions and smart alarm systems can bring about an enormous improvement,” Höppe states.

Other severe floods last year included those in June in the Himalayan valleys of the Indian state Uttarakhand; in June and July in Alberta and Ontario (overall losses of almost US$6 billion and US$1.6 billion, respectively); and in September in Colorado (overall losses of US$1.5 billion).

Munich Re notes that 2013 was a moderate year for natural catastrophes, as there were no large losses from earthquakes or United States hurricanes.

Overall losses came to US$135 billion, 27% below the average of the last 10 years (US$184 billion). Insured losses of US$35 billion were also below the 10-year average (US$56 billion) despite the high number of events in central Europe.

“The loss figures for 2013 show just how important preventive and protective measures are. This should send a clear signal to developing countries in particular: many are highly vulnerable to natural hazards and are experiencing massive growth in exposed values, but have yet to take suitable preventive measures to keep pace with these developments,” Torsten Jeworrek, Munich Re’s reinsurance CEO, says in the statement.

“The widespread use of insurance to help lessen the consequences of natural catastrophes would be of great benefit in these countries. Risk partnerships between the state and the international insurance industry, tailored to suit individual countries and exposure situations, could be an ideal way to approach the matter,” Jeworrek suggests.