Disaster Recovery Case Studies Germany Floods 2013

In cooperation with 1 2013: The Flooding in Germany Introductory Commentary Jonathan Gale, Chief Executive, Bermuda Reinsurance, AXA XL

The important role of (re)insurance in the speed of physical and economic recovery after a major disaster, especially when there is little to no coverage due to unavailability, insufficient capacity or lack of take up (predominantly because of economic reasons), has not really been studied in detail. The (re)insurance industry tends to focus on the potential for future events and events in the immediate past. However, there is a need for a deeper understanding of the aftermath of disasters over a longer time frame, as well as an understanding of the impact that insurance penetration has on the pace of economic recovery.

Working with Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School (CCRS) we have been examining more than 100 catastrophes across the world over a three-year timeline to compare and contrast outcomes and establish conclusions and recommendations. Our original plan was to have one consolidated report released in 2020 but the case studies (this one covers 2013 Germany floods) produced by CCRS were so interesting and of such quality we thought it would be beneficial to share these as they became available. CCRS will still issue a consolidated report in April 2020. We intend to make available publicly all of the detailed work in an open source database and also to establish a template to study future catastrophes in a structured way.

Our aim is for this work to be used as a tool by policymakers and governments worldwide when evaluating disaster preparedness and seeking to fully understand, from the lessons learned by others, the impact of displacement of populations; increasing personal debt levels; change in economic mix of industry; political upheaval and overall time to recover, among other things.

We also want to explain the marginal increased cost in relation to the value of rebuilding with resilience – what we call “building back better” – over and above the cost of replacement. The (re)insurance industry needs to provide extra limit and contractual stipulations for “building back better” to minimize the impact of future disasters.

Intuitively, we know the speed and scale of protection the (re)insurance industry provides dramatically reduces the recovery time for communities which have suffered through extreme catastrophes. However, we believe that it is imperative that this be demonstrated in more detail with evidence and placed in front of the right people to effect change – particularly governments.

We are starting to see good progress in terms of the increased role of governments in closing the gap between economic loss and insured loss – since we started these papers we have seen the FEMA program in Report Citation: the US placed in the market for the first time; Flood Re in the UK become fully operational and most recently Cambridge Centre for Risk Studies and the California Wildfire Fund established by the State of California and managed by the California Earthquake AXA XL, 2019. Disaster Recovery Case Authority (CEA), at least initially. Studies: Germany Floods 2013. Cambridge Centre for Risk Studies at the University of We are encouraged by this and will continue to support these initiatives with reinsurance and by sharing our Cambridge Judge Business School. findings from studies such as these. or Carpenter, O., Platt, S., Mahdavian, F., 2018; Disaster Recovery Case Studies: The views, findings and opinions in this case study are those of the researchers at CCRS and not necessarily those of AXA XL. Notwithstanding this, we are proud to be associated with this project and are sure that by gaining a greater level of understanding, we will ultimately develop more catastrophe reinsurance solutions and, more Germany Floods 2013. Cambridge Centre importantly, show the world the true value and social benefit of (re)insurance. for Risk Studies at the University of AXA XL is the Property & Casualty and Specialty division of AXA Group: providing products and services through four business groups: AXA XL Insurance, AXA XL Cambridge Judge Business School. Reinsurance, AXA XL Art & Lifestyle and AXA XL Risk Consulting. 2 2013 Floods in Germany AXA XL / Reinsurance 3

Contents Abstract Section 1: Event Context

Abstract 2 June 2013 saw major floods across Europe, including the most Hazard Characteristics severe flooding in Germany in the last 60 years, with record In the summer of 2013, unprecedented Section 1: Event Context 3 water levels along the lengths of the Elbe and Danube rivers. This flooding occurred throughout central ƒƒ Hazard Characteristics 3 case study examines the impacts of the floods in Germany – a Europe, affecting the western regions ƒƒ Socioeconomic Context 4 high-income economy with relatively high non-life insurance of the Czech Republic, Austria, and the ƒƒ Risk Landscape 4 penetration – and the subsequent socioeconomic recovery. southern and eastern German states. Particular attention is given to Passau, a city on the Danube Germany was particularly affected, Section 2: Disaster Impacts 5 that was among the worst affected, and where supportive experiencing the most severe large-scale ƒƒ Physical Impacts 5 fieldwork was conducted in 2019. The floods cost the German flooding in at least the last 60 years. May ƒƒ Social Impacts 5 economy between $6.7-9.1 billion, with severe and national-scale 2013 saw precipitation exceed monthly ƒƒ Economic Impacts 5 impacts on economic sectors including transport and critical averages by up to 300% throughout infrastructure, manufacturing, commerce, and on residential Germany, and new soil-moisture records Section 3: Disaster Management housing. The 2013 event is placed in the context of similarly were observed for 40% of the national and Resourcing 7 devastating floods in 2002, when serious deficiencies in flood territory. Flooding progressed along the ƒƒ Success of Disaster Management 7 risk management were exposed, subsequently provoking major Elbe catchment (including the Saale, ƒƒ Disaster Financing and the Role of changes in the German approach to flood risk management. Mulde, and Elbe tributaries), a main artery Insurance 7 Therefore, the nation was more aware of and better prepared flowing northwards through Germany in for flooding, and physical protection measures were widely to the North Sea, and Danube catchment Section 4: Recovery and Resilience 9 implemented, so the 2013 event caused comparably lower (including the Isar and Inn tributaries), ƒƒ Overview 9 damages that those in 2002. flowing west to east through Germany and ƒƒ Speed of Recovery 9 beyond south-eastwards. Flood stages ƒƒ Quality of Recovery 10 Although the scale of the event challenged disaster management were the highest ever recorded along ƒƒ State of Resilience Today 10 capabilities, the response and recovery efforts were generally well hundreds of kilometers of rivers (Figure 1). managed. Residential flood insurance penetration has remained Section 5: Discussion 12 relatively low in Germany despite slow growth in the market since Eight of Germany’s 16 federal states ƒƒ Recovery Outcomes: 2002, and only 32% of buildings across Germany were insured experienced some level of impact. Successes and Failures 12 in 2013. Recovery was primarily financed by the state, which Along the Danube river flooding ƒƒ Considerations for the allocated a total budget of €8 billion, while the insurance sector Figure 1: Extent of flooding across central Europe in June 2013 and selected record particularly affected the cities of Passau Insurance Sector 12 covered €1.65 billion (about 20%) of total losses. The recovery high-water levels. (Alexrk2/Wikipedia 2013) and Daggendorf, and the surrounding effort was generally judged a success as a result of adequate areas. Passau, the location of detailed Section 6: Key Findings 13 management and available finance, and 93% of households fieldwork for this study, is situated at the had returned to normal in under two years; although, certain confluence of the rivers Danube, Inn and Section 7: References 14 local, severely affected areas were much slower to recover. A Ilz, and water levels reached the highest negligible macroeconomic impact was felt, and economic activity recorded level since 1501 (Figure 2). Acknowledgments 16 recovered quickly. Five years after the event, 93% of private sector Along the Elbe, the most affected areas repairs had been completed, but despite localised successes, included Dresden, Grimma, Leipzig, Halle, the opportunity to incorporate resilience into recovery was not and Magdeburg. Munich and Landshut capitalised on. The reliance on state aid in particular hindered – both major municipalities on the River progressive measures, although since 2013 regulations have been Isar avoided serious damage due to developed to advance the role of insurance while rolling back flood protection measures implemented Disclaimer Information: The views contained in this report are entirely those of the research team of the Cambridge Centre for reliance on ex-post state aid. There is an increasing emphasis on following previous flooding, namely the Risk Studies, and do not imply any endorsement of these views by citizens’ taking responsibility for their own flood preparedness Sylvenstein Dam, heightened in 2000 to the organisations supporting the research, or our consultants and collaborators. The results of the research presented in this report and protection, although the uptake and success of this evolution increase its capacity. are for information purposes only. This report is not intended to is yet to be seriously tested in Germany. provide a sufficient basis on which to make an investment decision. The Centre is not liable for any loss or damage arising from its use. Any commercial use will require a license agreement with the Cambridge Centre for Risk Studies.

Copyright © 2018 by Cambridge Centre for Risk Studies. 4 2013 Floods in Germany AXA XL / Reinsurance 5

Section 2: Disaster Impacts

coordinating the management of flood reduce flood risk, including the German Physical Impacts risk in Germany, while the Committee Flood Protection Act of 2005. This Damage to buildings and contents was for Disaster Reduction (DKKV) provides a represented a movement from technically- both widespread and extensive, and national platform for disaster prevention. oriented flood defence towards integrated there were major losses due to business Further, the Federal Ministry of the risk management with an emphasis on interruption. In total, more than 32,000 Environment, Nature Conservation holistic resilience to floods. The German homes were damaged by the floods in and Nuclear Safety has authority over government also established the Federal 2013. Daggendorf, a town in Bavaria, environmental issues and policy. Office of Civil Protection and Disaster experienced some of the worst physical Assistance (BKK) to coordinate disaster damage, as flood water damaged oil tanks response and provide central access to and caused spillages. In cases where oil Risk Landscape resources before and during a disaster. penetrated the masonry, the buildings Flooding is the most significant and As a result, the floods that occurred had to be demolished. This exacerbated expensive disaster risk in Germany, in 2013 were alleviated by measures the level of structural damage to building and localised river and urban flooding implemented in response to the earlier stock that had already been done by the Figure 2: Historical flood levels in occurs frequently. The risk is expected floods in 2002. There were improvements floodwater. Five levee breaches occurred Passau, Germany. 2013 saw the highest to increase over the coming years due to in preparedness after the 2002 floods: 23% in various locations along the Elbe and water level since 1501. (Photo: Farnaz climate change and human development, of respondents to a survey on the state of Danube, flooding settlements behind Mahdavian) as the number and value of exposed preparedness in 2013 reported that they them, including in Fischbeck, Saxony- assets grows. were very well prepared, compared to Anhalt, where a high risk manoeuvre Figure 3: A levee breach in Fischbeck led to a risky manoeuvre to sink three barges only 3% in 2002, and 78% of respondents to plug the gap with barges gathered in order to plug the gap. The 2013 flood was not the only major to said they were completely unprepared significant media attention (Figure 3 ). Socioeconomic Context strike Germany in recent history. In 2002, in 2002, compared to only 19% in 2013.2 Germany has a highly developed, major floods exposed serious weaknesses There was also major investment in flood Transport networks were significantly market-oriented and service-dominated in German flood risk management, protection and in the Elbe catchment disrupted. 700 kilometres of road and Social Impacts Economic Impacts economy. GDP was growing at a rate of including deficient preparedness area, dykes were rebuilt or reinforced, and 150 bridges were damaged, impending Over 600,000 people were affected The 2013 floods were the most expensive 0.5% in 2013.1 The country is governed measures, missing or ineffective flood mobile flood barriers were used in various road traffic. Landslides, especially in by the floods in 2013.3 14 people died natural disaster of the year, costing the as a democratic, federal parliamentary warnings, poor maintenance of flood exposed locations. Baden-Wurttemberg, along with many and 128 people were injured. Over German economy between $6.7 and 9.1 republic. The Federal Office of Civil protection structures, and a lack of risk uprooted trees caused obstructions of 80,000 residents in eight federal states billion.5 In terms of financial loss, Saxony-

Protection and Disaster Assistance (BKK) awareness and knowledge. These floods 1 (World Bank 2019) road traffic, with many routes needing to were evacuated, with over 40,000 in Anhalt, Saxony, and Bavaria were the is the primary authority responsible for prompted extensive improvements to 2 (Ellenrieder 2018) be closed in both directions. The German Saxony-Anhalt alone. The flooding had a three most affected German states, each Railways Corporation had to close 60 significant psychological impact on many constituting 20-30% of the total cost rail routes in the aftermath of the flood. of the people affected. In a survey of 710 (Figure 5). Private households incurred The destruction of rail infrastructure residents, many reported that the physical approximately 22% of all losses, with an Research Approach in Stendal, Saxony-Anhalt, disrupted damage of the floods was less important average cost per household of $56,000.6 The Cambridge Centre for Risk Studies conducted extensive research into the impacts of the 2013 floods and the characteristics of the important high-speed connection than the psychological factors caused by 35% of the costs facing householders were flood recovery. This research is comprised of a desk study and fieldwork in 2019. Expert opinion was gathered using an internet- between Berlin and Hannover for five the trauma of disastrous flooding.4 Our insured, with the remaining cost covered based survey of 21 people who were involved in the disaster recovery process. The response rate was high and offers an expert months. This interrupted services survey of experts suggests that housing by a combination of private savings, loans, opinion on the recovery process following the 2013 floods. A reduced form of this survey was subsequently used to gather insights between the capital and important cities was more severely affected than the local and government aid. from residents of Passau, Bavaria. such as Cologne and Frankfurt. economy (Figure 4).

This case study offers important insights into the impact of a large-scale flood event on a community that were on the ‘front line’ of the disaster and offers a representative sample of recovery from a significantly impacted state. Although the case study focuses on a specific community, findings can be understood to be representative of experiences of many people who were significantly impacted by the 2013 flood event, although it is acknowledged that the characteristics of recovery differ across communities depending on a variety of controlling factors.

5 (Thieken, Kienzler, et al. 2016; Guha-Sapir, Below, and Hoyois 3 (Thieken, Kienzler, et al. 2016) 2018; BMVI 2016) 4 (Bubeck and Thieken 2018a) 6 (Thieken, Kienzler, et al. 2016) 6 2013 Floods in Germany AXA XL / Reinsurance 7

Section 3: Disaster Management and Resourcing

Disruption to business activities DE 2013 Success of Disaster available for reconstruction exceeded the amounted to $12.9 billion and the 100% Management cost of the damage caused by floods. most severely affected industries Response to the flood was coordinated were manufacturing and commercial by the Federal Office for Civil Protection Following the 2002 floods, losses to industries including hotels, restaurants and Disaster Assistance (BBK). The BKK private households were compensated up and transportation. 88% of businesses organised the distribution of emergency to 80% by the state. The money was not reported losses following the floods. aid to ensure that the system was efficient restricted to any specific use and could This was primarily due to the impacts of and non-bureaucratic. In Germany, be used at the homeowner’s discretion. turnover loss, disruption to operations 50% disaster relief efforts are primarily reliant This meant that opportunities to build and building damage. Infrastructure and on voluntary work, and 1.7 million back better in 2002 were largely missed. emergency services were also particularly voluntary workers formed the foundation In 2013, resources were allocated more badly affected, constituting almost 50% of of the disaster response supported by carefully to affected residents and the overall cost of the flooding.7 federal government resources. Volunteers businesses. Regrettably, however, the were organised into fire brigades, relief opportunity to combine reconstruction A study by Oosterhaven and Többen and aid organisations, the German Agency with risk reduction was once again 0% (2017) used a modelling methodology Housing Economy for Technical Relief (THW), and other missed. Generous government to estimate the wider, indirect impacts Total destruction Moderate agencies with further functions. assistance was found to disincentivise of the event, reporting the percentage Very severe Minimal self-provision, such as purchasing Severe None inoperability; or in other words, the direct flood insurance, because loss of production capacity in regional Figure 4: Impacts of 2013 floods on Figure 5: The most affected German Disaster Financing and residents believed that the economies. Bavaria, Saxony, Saxony housing and the economy. (Cambridge states by economic loss. (Die Deutschen the Role of Insurance government would cover Anhalt, and Thuringia all experienced Centre for Risk Studies survey of Vericherer 2014) Recovery was primarily financed by the the cost of damage. After a degree of inoperability, although German flood experts) state, which allocated a total budget of the 2002 floods, the this was way under 1% of state total €8 billion to the relief and recovery effort. German Insurance production. Indeed, as with most major Relatively low flood insurance penetration Association (GDV) global disasters, the floods resulted in a meant that the insurance sector covered advanced the negligible macroeconomic impact beyond only 20% (€1.65 billion) of total economic state of flood the initial loss. However, the inoperability losses.9 Only 35% of the costs facing of Bavaria’s economy was much lower householders were insured, with all compared to the three eastern affected remaining costs covered by a combination states, although the absolute size of of private savings, loans, and government inoperability was much greater.8 There aid. Of the €8 billion in state funding, were sectoral differences regarding €1.5 billion was used to repair federal the nature of business interruptions: infrastructure. The remaining budget manufacturers mostly suffered from their was split evenly between the federal own delivery problems and the delivery government and the states to support problems of suppliers, whereas the service disaster recovery. In addition to sector was mostly affected by sales federal funding, private donations reductions. from major charities and relief organisations amounted to €108 million. In total, the funds that were made

7 (Thieken, Bessel, et al. 2016) 9 (Die Deutschen 8 (Oosterhaven and Többen 2017) Versicherer 2014) 8 2013 Floods in Germany AXA XL / Reinsurance 9

Section 4: Recovery and Resilience

Overview DE 2013 Recovery is defined as a return to normality and an attempt to bring the 100% post-disaster situation to some level of acceptable performance. However, a €12.9b 32% €660m post-disaster ‘normal’ may not be a return 75% cost of business disruption of buildings across Germany insured total damage expenses in 2013 to the same status as before the event, against natural hazards, like flooding due to natural catastrophes especially if safety and amenity could be improved to enhance resilience and 50% achieve a new normal. Recovery from Housing

disaster can therefore be viewed as a Economy risk assessment using geo-information However, general policies that cover high- According to monthly claims expenditure process of resilience building, whereby 25% sciences and better data, to produce risk areas usually have exclusions. This statistics, June and July saw the majority the capacity of a community to spring detailed probabilistic flood models. This means that in areas such as Passau and of the expenses to the industry associated back after the initial shock of a disaster is meant premiums could be more reliably Grimma that are at a high risk of flooding with the flood event.13 Of the EUR 660 increased. Floods can act as catalysts for set and risk transferred from the state to and were severely affected in 2013, there million total damage expenses in 2013 due human adaptation and there is a ‘window 0% 0 1 2 3 4 5 6 7 8 the private insurance and reinsurance was a lower availability of flood insurance. to natural catastrophes,14 June and July of opportunity’ in the early phase of sectors.10 The state of Baden-Wuerttemberg is an were responsible for EUR 380.8 million recovery to improve resilience or ‘build Time to Recovery (Years) anomaly in terms of insurance penetration and EUR 132.7 million, respectively. back better’. Therefore, although there is Figure 6: Speed of recovery of housing and the economy. (Cambridge Centre for Risk In 2013, 32% of buildings across relative to the national average, because The distribution of insured losses were a strong imperative to recover quickly and Studies survey of German experts) Germany were insured against natural flood loss compensation was included in concentrated in Saxony, amounting to get people back home and business back hazards including flooding. Relative compulsory building insurance until 1994, EUR 900 million, as well as Saxony-Anhalt in operation, a balance must be achieved to 2002, insured losses to households and even though this monopoly insurance (EUR 310 million), Bavaria (EUR 270 between speed and enhanced resilience. damage to contents or building structure, experts were contemplating people who were considerably higher on account of was abandoned, insurance penetration million), Thuringia (EUR 140 million).15 respectively. 27.9% of respondents were worst affected and were displaced growing insurance uptake. In 2013, 32% remains extremely high at 94%.12 On the indicated that the flood event no longer because their homes were severely of buildings and 19% of contents were national scale, compulsory insurance Speed of Recovery had any effect, while 14.5% indicated flooded. insured against floods, up from 19% schemes have been questioned and then In Germany, our survey of residents that the flood event still strongly affected and 8% in 2002, respectively.11 Flood rejected on multiple occasions, notably in showed that 93% of households in Passau them. From this, it can be concluded that By 2018, five years after the event, lives insurance in Germany is available for 2004 and 2015 in the aftermath of the two had returned to normal in under two social recovery was yet to be completed and livelihoods had mostly recovered private households and commercial and discussed major events. years. This is supported by a survey16 of at this time (according to the definition of and private sector repairs, including industrial enterprises, usually offered as self-reported recovery of flood-affected recovery to 90% of the pre-event level or repairs to private homes, had been a selectable add-on to property insurance residents in Saxony-Andhalt, Saxony, to a new stable norm). Some regions took completed.17 Recovery was adequately or sometimes automatically included. Bavaria, and Thuringia (of which 83% longer to recover than others, controlled financed and damage repair in Saxony were property owners), which revealed by the level of financial aid that was was advanced, with most measures that 52% of respondents had (almost) offered by the state to aid recovery. completed. However, not all approved fully repaired the damage to their In contrast, our survey of experts flood relief measures had been paid and building structures, and 16% had (almost) suggested that housing took between the recovery of non-critical losses was not fully replaced damaged or destroyed five and six years to get back to normal complete. State infrastructure was being household contents. In contrast, for compared to three years for the economy repaired and losses incurred during the some respondents, building structures to return to normal operation (Figure floods were largely resolved but measures (13.5% of respondents) or contents (6.2%) 6). This significant difference between to incorporate resilience into recovery still showed considerable deficits. 1% residents and experts is interesting, and and rebuild were relatively slow to be of those surveyed reported that their a possible explanation is that residents implemented. houses had to be demolished after the surveyed included people who were only event, while 11.3% and 17.9% reported no minimally affected by the flood whilst

13 (Die Deutschen Versicherer 2014) 10 (Risk Management Solutions 2003) 14 Including flood/heavy rain, flood, earthquake, subsidence, snow 11 (Surminski and Thieken 2017) pressure, avalanches/landslides and volcanoes 16 (Bubeck and Thieken 2018b) 12 (Die Deutschen Versicherer 2014) 15 (Die Deutschen Versicherer 2014) 17 (Bubeck and Thieken 2018b) 10 2013 Floods in Germany AXA XL / Reinsurance 11

Quality of Recovery DE 2013 Flood recovery was held up by mitigate damage from the flooding in 2013 solutions, increasing risk awareness As discussed, a return to ‘normal’ may be 60% the German approval procedure and, thus, reduced damage. However, (particularly in les exposed areas), and a undesirable if the quality of a system could for construction that legally some buildings that were flooded in reduction of government assumption of be improved to enhance resilience. Floods requires a consultation process 2002 were flooded again in 2013 because losses, will drive an increased role of risk can act as catalysts for human change 50% (‘Planfestellungsverfahren’). This allows there had been no improvements to €5.4b transfer to the insurance industry. and there is a ‘window of opportunity’ in citizens to demand explanations for flood resilience and there was a lack of the early phase of recovery to improve 40% all the decisions that are made during awareness about how structures could The total budget for the [national Although steps have been taken to resilience or ‘build back better’.18 The the construction process and even be made more flood resistant and little flood protection programme] ensure that houses are no longer built ‘window of opportunity’ for accomplishing gives them the power to halt projects. incentive to inform building owners about includes dyke relocation, controlled on high risk flood plains, three million 30% post-disaster improvements is narrow, in In Grimma town, citizens opposed a how this might be done. There was also flood retention, and projects for people currently live in areas that are many cases lasting for just 18–36 months flood protection wall that blocked little financial incentive to rebuild in a the elimination of weak points in considered flood prone throughout after an event.19 Within this period, 20% their view, and in Mühlbeck, property better, more flood-resilient way.21 existing flood protection. Germany, with a 1-in-10-year probability governments are required to manage owners blocked an upgrade to a nearby of experiencing potentially damaging and a disaster and restore functionality of 10% levee. Community involvement in this After the 2013 floods, the federal life-threatening floods. Climate change critical systems, and so issues relating to consultation process prevented the state government approved a national flood is likely influencing rainfall patterns in an event are pushed high up the policy from making meaningful changes to protection programme (the Nationales There is evidence that homeowners are Europe, with historical observations agenda. 0% flood prevention measures and slowed Hochwasserschutzprogramm), due for willing to make investments in mitigation and model projections anticipating a much worse same better much Opportunities to ‘build back better’ were worse better post-disaster recovery. completion by the end of 2022, with the and research in Germany but, in order to declining trend for summer precipitation missed following the 2002 flood. This aim to develop preventative measures and increase uptake, communication should in central Europe away from the coast, Housing was largely due to a lack of regulation give rivers more space, while addressing focus on the potential of flood-mitigation and an increase in winter rainfall. Heavy Economy concerning the allocation of state aid to State of Resilience Today conflicts of interest between exposed measures to effectively reduce or avoid rainfall events are expected to result in homeowners that did not require repair After the 2002 floods, efforts were made or associated stakeholders. The total flood damage and on information about more frequent fluvial flooding in winter, and rebuilding measures to advance the Figure 7: Quality of recovery in terms to develop an integrated system of budget for the programme is €5.4 billion, how to implement such measures in but summer precipitation events, as state of resilience. However, our survey of of changes in safety and amenity. flood management which led to some and includes dyke relocation, controlled practice. seen in 2002 and 2013, are capable of experts indicates a more positive outcome (Cambridge Centre for Risk Studies households being better prepared for the flood retention, and projects for the triggering extreme losses. There are strong after the 2013 floods. About half the survey of German flood experts) event in 2013. Equally important were the elimination of weak points in existing Despite the significant losses in 2013, indications that climate change can be experts surveyed thought the resilience improved warnings and dissemination flood protection.22 Since 2013, federal domestic insurance penetration remains attributed for the increase in weather of both housing and businesses improved of information in the run-up to the 2013 governments and the insurance sector relatively low, at 41% in 2018, and patterns producing intense rainfall and (Figure 7). flood, which represent improvements in have worked to increase risk awareness there exists major regional variations.23 resultant river floods.25 Nevertheless, such Flood affected households that had flood the level of resilience to floods.20 Several amongst homeowners and businesses However, the federal government will phenomena is relatively well understood, Recovery was also influenced by insurance were better compensated than legislative changes were introduced, in Germany. The German Insurance no longer offer compensation to the and advanced protective mechanisms socioeconomic characteristics and those who were uninsured, but the level including the German Flood Protection Association (GDV) provides regularly uninsured and insurance is therefore that have advanced significantly following psychological factors. Social inequality of compensation offered by the state was Act of 2005 and the EU Floods Directive updates to its flood risk mapping and the expected to rise further. From 2019, recent flood events are able to reduce and marginalisation affected housing so high (80% of damages) that the speed of 2007 that considered both structural authorities in most states have extensive Bavaria will no longer provide emergency major flood losses. Flash floods are, reconstruction, meaning that many and quality of recovery was effectively and non-structural means of mitigating information campaigns. financial aid to disaster victims who could in comparison, difficult to predict and lower-income groups and tenants could the same for insured and uninsured damage. A study evaluated these post- have purchased private insurance. The therefore prepare for; in 2016, over 30 not recover and had to leave their homes. households. There was also no measurable 2002 changes that included consideration There is an increasing emphasis on insurance industry has now expanded flash flood events occurred in the south Those who stayed were mostly uninsured difference in the quality of recovery in of flood hazards in spatial planning and citizens taking responsibility for their own its portfolio, and now offers individual and east of Germany (particularly Bavaria homeowners, the elderly and residents uninsured and insured properties. urban development, comprehensive flood preparedness and protection. A insurance solutions for the ‘Zürs 4’ flood and Baden-Württemberg) within a two who were in poor health. The latter two mitigation and preparedness measures survey of households affected by the 2013 zone. The German Insurance Association week period.26 High flow rates caused groups then experienced marginalisation within properties, more effective flood floods in Saxony and Bavaria explored (GDV) regularly updates and improves its severe erosion, and in many cases, because they were unable to move to new warnings, a more coordinated disaster ways of encouraging citizens to take flood zones and is currently developing exposed home and business owners were areas, thereby representing an increase in response, and better maintenance of responsibility and improve household a hazard zone for flash floods.24 The unprepared for the hazard.27 vulnerability in the recovery process. flood-defence systems, all helped to resilience in partnership with the State. combination of improved insurance

21 (Zurich Insurance Company 2014) 23 (Die Deutschen Versicherer 2018) 18 (Johnson, Tunstall, and Penning-Rowsell 2005) 22 (Bundesministerium fur Umwelt, Naturschutz und nukleare 24 (Ellenrieder 2018) 26 (Davies 2016) 19 (Platt and So 2017) 20 (Kreibich et al. 2011) Sicherheit 2019) 25 (Ellenrieder 2018) 27 (Ellenrieder 2018) 12 2013 Floods In Germany AXA XL / Reinsurance 13

Section 5: Discussion Section 6: Key Findings

Recovery Outcomes: floods demonstrated that dyke defence regularly updates and improves its The flooding that inundated large areas of While insurance penetration increased Effective state aid allowed some sectors to Successes and Failures is not always successful, and this was flood mapping and state governments Germany in 2013 was unprecedented, but somewhat following the flooding in 2002, recover rapidly, however it disincentivised The flood forecast and warning was much compounded by slow dyke constructions have launched extensive information in many ways not unexpected. The flood overall penetration in Germany remained individuals from investing in flood better than in 2002, and this meant that along the Danube. There were widespread campaigns. Could the insurance sector of 2002 had demonstrated that there was extremely low so the majority of disaster insurance. This has been changed since there were fewer fatalities and injuries psychological effects after the flood, play a bigger role in ‘building back an increasing risk of devastating flooding funding came from the state budget. the 2013 floods through legislation that caused by the 2013 floods. Authorities which persist long after the physical better’? Risk reflective insurance premium in the country, and some risk reduction Opportunities to build back better were prevents people accessing state recovery cooperated effectively amongst and economic recovery has been largely pricing can encourage engagement with measures had already been put in place. missed in 2002, but following the 2013 aid if they could have purchased flood themselves and with rescue teams, and completed. mitigation measures, for example through Some of these measures, such as the early flood there was a step change in approach insurance. This is likely to dramatically there was good coordination between insurance discounts once the measures warning system and increased awareness to flood risk management representing increase overall flood insurance volunteer teams and the city. Prompted are installed.30 And insured households of flood risk, helped to ensure that the reformative recovery and an emphasis penetration. Ultimately, however, the by the 2002 flood events, the state was Considerations for the in Germany are more likely to undertake impacts and economic losses were lower on reforming infrastructure and social consultation process that allows residents better prepared for flooding, and there Insurance Sector risk reduction measures than uninsured, in 2013 than it had been in 2002, and preparedness to become more resilient to to interrogate any construction process was overall a higher level of awareness The geography, frequency, and intensity suggesting that flood insurance does reduced the number of people who were flooding. will inhibit many dramatic improvements and preparation. This meant that the of intense rainfall events and resultant set an incentive for policyholders to severely impacted and to a level that to structural flood defences unless the damage caused by the 2013 floods was flooding has shown considerable take action. However, as yet, insurance required significant recovery effort. government invests significant time on only one third of that caused by the 2002 variability across Europe in recent companies do little to encourage However, the state was still gaining public support and acceptance for event, despite the greater magnitude in decades. However, most studies agree precautionary measures.31 underprepared for the 2013 flood event the projects. Improving flood resilience in numerous locations. The response and that the risk of severe storm events is and some areas that had been flooded Germany will therefore have to involve the recovery effort was adequately financed, increasing for northern and central Europe in 2002 were once again impacted by whole community, not just key decision largely by the state who allocated a €8 in response to forecast global climate flooding in 2013; in certain cases, flood makers in each area. billion fund. This state support enabled change.28 This increased incidence of protection measures simply shifted the those without insurance to recover flooding presents insurers with a dilemma; impacts downstream. This indicates that losses, but equally undermines and they can either carry on meeting repeated many of the flood defence systems that disincentivises insurance purchase in the large claims from a minority of claimants, were implemented following the 2002 first place. or exclude hazardous areas with a event failed to prevent the catastrophic high probability of flooding. Insurance effects of the 2013 flood. In spite of such improvements made penetration, although still low in Germany following the 2002 floods, task forces (41% nationwide in 2018), is set to rise were simply unprepared for and unable substantially as the federal government to cope with the expansive scale of the will no longer offer compensation to flood. Incorrect warnings of flood height the uninsured. Bavaria has announced and the flood characteristic meant that, from 1st July 2019, it will no longer that many residents were surprised provide emergency financial aid following by the flooding at night. Differences in natural disasters to victims who could mentality caused some coordination have purchased insurance.29 problems in the field and interrupted collaboration between response teams. Since 2013, federal states, insurance The flooding demonstrated that different associations and the insurance industry communication is needed between have adopted numerous measures the state and affected members of the to increase risk awareness among public, and flood help must become less homeowners and businesses in Germany. bureaucratic during a disaster. The 2013 The German Insurance Association

28 (European Environment Agency 2017b; 2017a) 30 (Kunreuther and Michel-Kerjan 2009) 29 (Ellenrieder 2018) 31 (Thieken et al. 2006) 14 2013 Floods in Germany AXA XL / Reinsurance 15

Section 7: References

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Acknowledgements

The views contained in this report are entirely those of the research team of the Cambridge Centre for Cambridge Centre for Risk Studies gratefully acknowledges AXA XL Risk Studies, and do not imply any endorsement of these views by the organisations supporting the for supporting the research efforts summarised in this report. The research, or our consultants and collaborators. The results of the Cambridge Centre for Risk Studies research presented in this report are for information purposes only. This report is not intended to Centre is grateful for the expertise provided by our research team, provide a sufficient basis on which to make an investment decision. The Centre is not liable for any loss collaborators, and subject matter specialists, and thanks Jessica or damage arising from its use. Any commercial use will require a license agreement with the Cambridge Centre for Risk Studies. Platt for her work on this report. Copyright © 2018 by Cambridge Centre for Risk Studies.

Report Citation: Carpenter, O., Platt, S., Mahdavian, F., 2018; Disaster Recovery Case Studies: Germany Floods, 2013. Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School.

Cambridge Centre for Risk Studies Research Team James Bourdeau, Research Assistant Phil Cameron, Research Assistant Oliver Carpenter, Research Assistant Dr Andrew Coburn, Chief Scientist Jennifer Copic, Research Associate Dr Jennifer Daffron, Research Associate Ken Deng, Research Assistant Timothy Douglas, Research Assistant Tamara Evan, Research Assistant Farnaz Mahdavian, Risk Researcher Dr Stephen Platt, Senior Risk Researcher Kelly Quantrill, Research Assistant Professor Daniel Ralph, Academic Director Simon Ruffle, Director of Research and Innovation Dr Andy Skelton, Senior Risk Researcher Timothy Summers, Risk Researcher Jayne Tooke, Communications Assistant William Turner, Risk Researcher Dr Michelle Tuveson, Executive Director

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