Have you have heard of, or experienced yourself, climate-related catastrophes in the past years? Think of the flood in Germany in 2021, the flood in Spain in 2024, the drought in Croatia, and many more.

These were emotional, humanitarian, and financial catastrophes. Were you happy with the way the affected people have been helped? What did you expect from whom? Who is responsible? What have you done yourself to help? How can we do better in the future?

Know that you can do something, and we can do something together. Remember, in Europe, together we are the state, together we are responsible for our values and our government policy. Every one of us influences the greater whole. We all pay taxes to finance the greater whole.

You can inform yourself: How high is the risk for myself? Can such a catastrophe happen to me?

You can plan your own budget: What is my own financial capacity to carry the financial damages in case of a catastrophe?

You can share the rest of your risk: Most people do not have the financial means to shoulder large financial shocks. Insurers specialize in financial risk management and have the capital to carry a large portion of the risk. Insurance is one of the best methods to share your financial risk. Professional insurance companies will pay you an agreed amount in case of catastrophes, which will protect you from financial ruin. Of course, they will require compensation. How else do you expect them to pay everyone affected by a catastrophe?

The more people are insured, the more resilient a community is, and the better it can recover from a disaster. Therefore, it is important to close the so-called insurance gap. One example is the flooding caused by Storm Bernd in Germany in 2021. Insured damages amounted to 8.5 billion euros, whereas the total damages were a lot higher. Many uninsured people, therefore, needed to rely on their own savings and on the German government for financial support. This natural catastrophe resulted in the biggest economic loss in Germany of its kind ever.

You can expect help from society and government: There are many examples within Europe and in the rest of the world that show: it is possible. How can governments help: they can provide

1) risk and management information,

2) subsidies for insurance, to increase insurance uptake and reduce the insurance gap,

3) subsidies and funding for resilience or adaptation measures,

4) subsidized bank loans,

5) technological and technical support.

You can influence the policy and choose the right people for the government: vote for climate risk management! Governments are chosen by the people to act in the interest of the country and therefore have a clear mandate to manage climate risks. They must take the lead in governance of resilience measures. Even now, governments often do not recognize this mandate or do not feel the urgency to act in advance, whereas they often provide (limited) financial aid for uninsured citizens after a major disaster.

We all understand that it is better to prevent damage and to ensure capital availability in advance than to pay for damage after a disaster. Disasters do not happen often, fortunately, but the insurance gap in Germany is still quite big, and also smaller natural catastrophes can result in massive economic losses, which then have to be borne by those affected and the government. If it’s not possible to increase the insurance uptake among the general public, then the focus should be on increasing resilience. Increased resilience can, in turn, lead to
reduced insurance premiums, possibly leading to an increased insurance uptake and a reduced insurance gap.

How can governments manage their own climate risk?

1) They can insure public property, like infrastructure and buildings,

2) They can take the lead in national climate risk management by,

• Acting as a reinsurer or guarantee for insurance companies offering climate insurance, and if needed, procure its own reinsurance, and
• Creating conditions and motivation for insurance companies to offer affordable and suitable insurance products.

Authors: Maria de Vries, Paul Eberlein