Allianz Trade: Flood damage in Europe rising significantly – Germany particularly affected

Milo Bogaerts, CEO of Allianz Trade in Germany, Austria and Switzerland, said: „Hochwasser sind extrem teuer - und sie häufen sich". He also emphasized: „Ein Hochwasser ist zwar zunächst ein lokaler Schock, die ökonomische Folgewirkungen erfassen jedoch die gesamte Volkswirtschaft". The analysis draws, among other things, on a report by the World Meteorological Organization (WMO) from last year, according to which the global water cycle is disrupted as a result of climate change. As a result, many rivers carry either too little or too much water.

Germany as a focal point

The authors of the study note that the frequency of flood events has not increased, but that the intensity of individual events has changed. They point as an example to the 2021 flood disaster in the Ahr Valley. Following that disaster, Germany expanded early warning systems, passed the Climate Adaptation Act, and revised flood hazard maps.

The analysis breaks down the economic damage of a flood in detail. The average economic damage of a flood in Europe between 2000 and 2019 was around 100 million euros, adjusted for inflation. A significant flood event could reduce Germany's economic output by a cumulative total of around 108 billion euros over the subsequent three years. That corresponds to a decline in gross domestic product of 0.7 percent.

Economic consequences of an extreme flood

The modeled GDP decline is attributable, beyond direct property damage, primarily to delayed investments, production interruptions, disrupted supply chains, and weaker consumer demand. A renewed severe flood in Germany in 2027 would lead, by 2030, to a cumulative decline in gross fixed capital formation of 11.9 percent, equivalent to a loss of around 83.6 billion euros. Real disposable income in Germany would fall cumulatively by around 4.1 percent, with cumulative consumption losses amounting to around 44 billion euros. The government deficit would widen by a cumulative 1.7 percentage points of GDP between 2027 and 2030. This gives Germany the highest absolute investment shortfall of any country examined.

Bogaerts cited as consequences „ausbleibende Investitionen, geringere Einkommen und schwächeres Wachstum". According to the study, one reason for the growing damage bill is that people continue to live and work in flood-prone areas. Without additional adaptation measures, annual river flood damage in the EU and the United Kingdom could increase sixfold by 2100 to nearly 50 billion euros per year. The costs were calculated assuming warming of 3°C by 2100, without corresponding adaptation measures.

Call for greater flood protection

Hazem Krichene, Senior Climate Economist at Allianz Research, stated: „Anpassung an Hochwasserrisiken ist viel mehr als bloße Klimapolitik - sie ist vorsorgende Wirtschafts- und Fiskalpolitik". He pointed out that floods hit private households especially hard, as people's own homes can be affected and livelihoods endangered, with financial burdens lasting many years. „Sachschäden sind nur eine Komponente bei den Kosten von Hochwassern. Das Wirtschaftswachstum leidet langfristig", said Krichene.

Allianz Trade therefore recommends investing in flood protection. „Investitionen in Hochwasserschutz zahlen sich aus. Jeder investierte Euro spart Schäden in etwa vierfacher Höhe", said Krichene. The company quantifies the "immense macroeconomic benefit" of such investments. According to the analysis, there is considerable catch-up needed in Germany: although measures totaling 6 to 7 billion euros have been planned since 2013, just over 500 million euros have actually been disbursed to date. The key obstacles are, above all, lengthy approval procedures and the complex division of responsibilities between the federal government, states, and municipalities.

The Allianz Trade Group, headquartered in Hamburg, is, according to its own statements, the global market leader in the credit insurance business and has more than 100 years of experience. The company states that it monitors and analyzes the insolvency developments of more than 83 million small, medium-sized, and multinational companies every day, with immediate access to data on 289 million companies in more than 160 countries.