Insurers are facing huge bills for the floods that have devastated much of Europe - in Austria alone costs are expected to exceed €1 billion.This content was published on August 13, 2002 - 12:01
One insurer likely to have to shoulder much of the cost, Swiss Re, blames the unusual weather conditions on global warming.
"The average global temperature has risen, which has pushed up average humidity. This in turn leads to flooding," Pamela Heck, a climate risk expert at Zurich-based Swiss Re, told swissinfo.
Swiss Re, the world's second largest reinsurer, estimates that the recent floods have wiped out 20 per cent of crops in neighbouring Germany.
Since the September 11 attacks, insurance companies have re-negotiated policies to reduce the amounts they would be required to pay out.
But with the terror attacks foremost in their minds, the aim has been to limit their exposure to terrorist-related incidents.
Now they are facing huge claims for weather damage from Germany and Austria where, like most developed countries, insurance cover is almost total.
"The awareness of environmental risks is growing and there is a tendency toward improving coverage," said Heck. "That's why we have re-defined our risk criteria in the last months."
The claims come at a time when increased competition is putting pressure on premiums, and weak equity markets are driving down insurers' reserves.
The International Monetary Fund (IMF) last June found the Swiss financial system, including its insurance industry, to be in good health. But that was before the Swiss stock market went into freefall, with quoted insurance companies losing more than 30 per cent of their value.
Unlike most countries, where insurance cover for buildings is not mandatory, Swiss law compels owners to insure all homes, offices and other structures.
However, buildings insurance is handled by cantonal-guaranteed insurers, and private firms are totally excluded so they face no liabilities in cases of flooding and other natural disasters.
By Daniele Papacella
Flooding in Austria has caused an estimated €1 billion worth of damage.
An estimated 20 per cent of crops have been destroyed across Germany.
In the Mecklenburg-Vorpommern region of Germany, damage to agriculture is estimated at €100 million.
Switzerland has escaped significant damage.
Buildings insurance is mandatory in Switzerland, unlike most countries.
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