Insurers say everyone will need flood coverage as climate change impact unfolds

Insurers want every Netherlands resident to be able to get coverage against major flooding from 2025. Currently, damage caused by large rivers overflowing dikes or sea wall collapses is covered by the government at its own discretion. But the 2021 floods in Limburg have shown insufficient protection, the Association of Insurers said to AD.

The dichotomy on who covers what type of flood damage stems from the 1953 flood disaster, which caused so much damage that insurers could never bear it. Therefore, the government became the party that had to compensate for the damage when the primary flood defenses - large river dikes and sea defenses, for example - failed. Insurers cover floods resulting from local precipitation, canals, streams, or small rivers.

The insurers want to change that. According to the Association of Insurers, the Limburg floods showed that the current system creates a lot of confusion and is not functioning properly. “For people in Limburg, it was very unclear,” Geeke Feiter, director of the association, said to the newspaper. “What was insured, what was not? What did they have to go to the insurer for, what to the government for?”

Added confusion is that the flood in Limburg wasn’t caused by a primary defense but by the Geul, a stream. That meant the government had no formal task to compensate for the damages. Due to the extent of the damage, insurers agreed to be lenient, and the government set up a special compensation scheme, which was not formally intended for a disaster of this type.

But according to mayor Daan Prevoo of Valkenburg aan de Geul, the compensation scheme did not provide the immediate relief it promised. “Instead of simply compensating for the damage, every claimant must prove that the flood caused the damage. Many people still do not know where they stand or are only partially reimbursed. Look, no one asked for such a natural disaster. Why then do people have to be left with the misery afterward?” he said to the newspaper. “Climate change continues, as the floods showed us. Those who do not live behind a primary flood defense are also at risk. These people need protection as well.”

The insurers agree that contact with the government caused “a lot of stress” for Limburg residents. “Due to the lack of a proper handling process, you saw delays and frustration. And because it took a long time, there was also consequential damage,” a spokesperson for the Association of Insurers said to AD.

So the sector is advocating a completely different tack. From 1 January 2025, Netherlands residents must be able to insure themselves against any flood, whatever the cause. That would obviously mean higher premiums for insured persons, the spokesperson for the association said. “But the advantage is that people know where they stand. The government now determines afterward what damage it will compensate. That creates a very uncertain situation.”

It is also a significant change for insurers. According to estimates, a flood at the primary defenses can cause some 14 billion euros in damages. “That is still far too large an amount for individual insurers. We can only absorb it by working together and covering risks on the international market,” the association spokesperson said. The insurers hope the government will also participate.

Earlier attempts to create uniform flood insurance failed due to objections from national politicians. But the insurers are confident that the 2021 flood created the “political momentum” to achieve it this time. “The situation in Limburg was a real eye-opener. Politicians also see that this needs to be better regulated,” the association spokesperson said.