Climate Change – Counting the Costs

Chris Waller - 19th July 2021
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This week (w/e Friday 16/7/21) has seen unprecedented flooding in West Germany and the Low Countries. European insurers have described these events as the most expensive flooding episodes on record and are bracing themselves for claims running into the billions of euros.

The European insurance brokerage Aon reports that previous storm and flood damage in parts of eastern Europe in the latter half of June ( an episode from June 17-25 that mostly impacted the Czech Republic, Germany, France, Switzerland and Austria) is already set to cost the insurance and reinsurance markets at least $2.5 billion. A tornado on 25th June in the Czech Republic reached F4, causing 6 deaths, injuring 200 others and damaging over 1,000 homes. Severe weather returned to Central Europe on June 28-30, as large hailstones, the size of tennis-balls, caused damage in central Switzerland and Austria

Flooding in Germany in June of this year has already cost an estimated €1.7 billion and the July event is expected to push total losses to €8 – 9 billion. Switzerland and parts of Bavaria have also seen flooding. This latest episode is expected to cost insurers a further $4.5 billion. The German government has already made €300 million available for immediate relief work.

Meanwhile in California, of the 80 wildfires currently burning, two are of unprecedented proportions. As of July 12th the Beckwourth fire complex (where two existing fires combined) a total of 145 square miles has been burned. In one day alone the fire increased in area by one-third. A little further north in Oregon the Bootleg fire grew to more than 476 sq miles (1,210 sq km), an area about the size of Los Angeles. To put it in perspective, that is about 30% of an average English county.

The cost of these wildfires is increasing decade on decade. In the 1980s the cost of wildfire suppression (that is, fire control and firefighting expenditure) was about $25 million per annum. In the last decade this has risen to $401 million. That is only the cost of fire control measures. In 2017 wildfires caused over $18 billion-worth of damage including consequential losses. This is only the beginning of this year’s fire season and losses are expected to exceed previous years’ losses by a big margin.

To add to their woes, property-owners in California are finding it increasing difficult to find insurers willing to take the risk. In the last four years 340,000 California residents have had their fire insurance withdrawn. For those who can afford insurance, premiums have risen by 300 – 500 percent. Those who cannot find insurers have to fall back on the state-backed FAIR insurance programme, a pool of insurance companies who provide basic cover – at a price.

At time of writing (19/7/21) firefighters in Canada continue to battle dozens of blazes, including some 20 new fires in British Columbia and around 15 in north-west Ontario.

Separately, India's capital New Delhi and the main financial centre of Mumbai were drenched with heavy rain on Monday, a day after at least 35 people were killed across the country in landslides and house collapses triggered by downpours.

It’s going to be a long, hot – and probably very wet – summer.

Sources
www.artemis.bm
BBC News
Santa Cruz Sentinel
The Guardian
Statista The Telegraph

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