Tips on natural hazard insurance

Repair costs, reconstruction costs or replacement purchases that become necessary as a result of a natural event can be covered. ‘Which natural events are covered depends on the respective cover,’ explains Katrin Gutseel, Product Manager at the Ecclesia Group. ‘Only 1.5 percent of building owners have no or insufficient options for taking out natural hazard insurance.’

System with 22.2 million addresses

The risk of flooding varies from region to region.  The German Insurance Association (GDV) has developed a zoning system for flooding, backwater and heavy rain called ‘ZÜRS Geo’ to assess the risk for each region. This helps insurers to assess the extent to which a building is at risk of flooding. ‘This is important for calculating the insurance premium,’ explains Katrin Gutseel. The system contains 22.2 million addresses, which are categorised into four different hazard classes. 92.4 percent of the addresses in the system are in hazard class 1. Only 0.4 percent of the addresses are in hazard class 4. They are affected by flooding at least once every ten years.

Protection against heavy rain

The ‘ZÜRS Geo’ system also offers the option of assessing the risk of heavy rain. ‘This allows us to provide our customers with personalised advice on protection against heavy rain and use this information to calculate the risk,’ explains the Ecclesia insurance expert. The GDV categorises the 22.2 million addresses into three heavy rain hazard classes (SGK). 22.5 percent of addresses are in SGK 1 with a lower risk; these buildings may be located on a hilltop or at the top of a slope. There is a high risk in SGK 3. This applies to 2.6 million addresses. The buildings are located in a valley or near a river. Katrin Gutseel: ‘The hazard classes show very well in which region there is a particular risk. However, we also have the problem that many areas are asphalted and sealed. When it rains heavily, there are few opportunities for the water to seep away or run off.’ Finding out more about natural hazard protection can therefore be worthwhile.

Parametric insurance as an option

In addition to traditional insurance against natural hazards, parametric cover is becoming increasingly important. These take effect where there are insurance gaps. This solution protects against climate-related risks, for example. The benefit obligation is based on previously defined criteria. ‘There is a pre-agreed reference value (trigger) and if this is exceeded, for example if the earth's surface is under water by 20 centimetres, then the parametric cover would take effect,’ explains Katrin Gutseel. In this case, the corresponding sum insured would be made available to the customer. The advantages of parametric cover are very transparent calculation criteria and often fast payouts in the event of a claim. ‘However, this cover is not yet established on the market and is also relatively expensive,’ explains the insurance expert.