Homeowners’ insurance also covers major damage from hailstones.
Source: Photograph: © Stillkost / stock.adobe.com
2019 Monitoring Report on the German Strategy for Adaptation to Climate Change
In general, homeowners’ comprehensive insurance is a less profitable business for insurance companies. After price responses to increasing amount of damages, the years 2016 and 2017 reverted to actuarial profits.
Increasing claims ratio figures signify increasing expectations of damages to be paid by insurance companies in view of the changing relationship of income and expenditure in the insurance segment concerned. Such considerations play an important role in terms of an insurance company’s balance sheet. In 2017 storms and hailstones caused damage totalling 2.6 billion Euros, the equivalent of 90 % of insurance damage in the fields of property and motor vehicle insurance.
Whether an insurance segment is profitable is indicated by the so-called combined ratio. The storm events of recent years left their mark on the combined ratio of homeowners’ insurance. Where the ratio exceeds 100 %, this indicates that this is a loss-making business for the company. In the segment of homeowners’ comprehensive insurance, the combined ratio is usually comparatively high. This regularly causes actuarial losses to insurance companies. Looking back over the past 21 years, for which data covering the German insurance companies in the field of private property insurance are amalgamated in a central database, it becomes clear that up until 2015 German insurance companies were able to make an actuarial profit in only three years (1997, 1998, 2001) in respect of homeowners’ comprehensive insurance. Between 2002 and 2014 the insurers of homeowners’ properties accumulated an actuarial minus of more than 7 billion Euros. For a long time the competition on price in the field of homeowners’ comprehensive insurance was very keen, which made insurance companies hesitant to adapt their calculations to the premiums charged. Since the end of the price war over homeowners’ insurance and the resulting increase in premiums, the combined ratio for 2016 and 2017 has reverted to below 100 %. Consequently, in those years it was possible again to achieve an actuarial profit in the field of homeowners’ comprehensive insurance. So far it has not been possible to identify a discernible trend in respect of the combined ratio.
By comparison, looking at the time series for the claims ratio – which does not include the costs of administration and contract conclusion thus not permitting any immediate statements on the profitability of the insurance business – the picture is quite similar. There is no discernible trend in this respect either.
If insurance companies want to avoid charging their clients further premium increases, they will probably have to demand more personal provision by the insured themselves. This means that homeowners will have to become proactive themselves by proving that, thanks to architectural measures, they have been able to achieve better protection of their buildings from the impacts of natural hazards. The insurance industry continues to work on the premise that it remains possible to provide insurance in Germany for damage caused by natural hazards despite being faced by climate change.
BAU-I-5: Claims expenditure for property insurance
BAU-R-4: Funding for building and refurbishment adapted to climate change
Active management of risks and opportunities by banks and insurance companies (DAS, ch. 3.2.10)
The UBA’s motto, For our environment (“Für Mensch und Umwelt”), sums up our mission pretty well, we feel. In this video we give an insight into our work.
