Economic impact of weather disasters – munichre.com

Analysis of Weather-Related Economic Losses in Europe and Alignment with Sustainable Development Goals

Germany

• A significant upward trend in weighted losses has been observed, critically highlighted by the Ahr Valley flooding in 2021, which resulted in economic losses exceeding US$ 42 billion.
• Primary drivers of loss since 1980 include flooding (approximately 50%) and severe thunderstorms (approximately 25%).
• A persistent and substantial insurance gap of 54% was noted, indicating a lack of financial resilience against climate-related disasters.

Relevance to Sustainable Development Goals (SDGs)

1. SDG 13 (Climate Action): The escalating losses from extreme weather events underscore the direct economic consequences of climate change, reinforcing the urgency for comprehensive climate action and adaptation strategies.
2. SDG 11 (Sustainable Cities and Communities): The Ahr Valley disaster exposes significant vulnerabilities in community and infrastructure resilience, highlighting the need to build and retrofit settlements to withstand climate shocks.
3. SDG 1 (No Poverty): The large insurance gap directly undermines poverty reduction efforts by exposing a majority of the population to catastrophic financial loss, which can push vulnerable households into poverty.

Italy

• Historically, flooding events have been the primary cause of weather-related losses, accounting for two-thirds of the total.
• A recent trend reversal shows severe thunderstorms, particularly hail, now cause over 40% of losses, with Northern Italy identified as a high-risk region due to climate change.
• The insurance gap remains critically high, with an average of 86% of losses being uninsured between 1980 and 2024. This has recently narrowed but remains at approximately two-thirds.

Relevance to Sustainable Development Goals (SDGs)

1. SDG 13 (Climate Action): The documented increase in severe hailstorms provides clear evidence of the regional impacts of climate change, necessitating targeted adaptation policies.
2. SDG 8 (Decent Work and Economic Growth): The extremely high proportion of uninsured losses poses a significant threat to economic stability and sustainable growth, as recovery from disasters is largely unfunded.
3. SDG 11 (Sustainable Cities and Communities): The shifting risk profile from floods to severe thunderstorms requires an evolution in urban planning and infrastructure standards to ensure community safety.

France

• Between 1980 and 2024, winter storms (44%) and flooding (25%) were the leading causes of inflation-adjusted losses.
• In the last five years, severe thunderstorms have become the dominant cause of loss (38%), a trend attributed to climate change. Southern France is noted as a region with growing risk from severe hailstorms.
• The insurance coverage is moderate, with just under half of the total weather-related losses since 1980 being insured.

Relevance to Sustainable Development Goals (SDGs)

1. SDG 13 (Climate Action): The emergence of severe thunderstorms as the primary economic threat is a direct indicator of a changing climate, demanding immediate action to mitigate future risks.
2. SDG 9 (Industry, Innovation, and Infrastructure): The increasing potential for high-loss hailstorms necessitates innovation in building materials and infrastructure design to enhance resilience against new forms of climate threats.
3. SDG 11 (Sustainable Cities and Communities): The identification of Southern France as a high-risk zone calls for proactive regional planning to protect communities and economic assets.

United Kingdom

• The UK is the only major European economy analyzed to exhibit a downward trend in weighted weather losses.
• Primary historical loss drivers include winter storms (52%) and floods (approximately 33%).
• The positive trend is attributed to a lower frequency of severe storms in recent decades and significant investment in resilient infrastructure, such as the Thames Barrier for flood protection.

Relevance to Sustainable Development Goals (SDGs)

1. SDG 11 (Sustainable Cities and Communities): The success of the Thames Barrier in protecting Greater London from storm surges serves as a best-practice example of how targeted infrastructure investment can create safe, resilient, and sustainable urban environments.
2. SDG 9 (Industry, Innovation, and Infrastructure): The UK’s proactive investment in flood defenses demonstrates the critical role of resilient infrastructure in mitigating disaster risk and safeguarding economic activity, directly aligning with this goal.
3. SDG 13 (Climate Action): The UK’s experience highlights the effectiveness of adaptation measures in reducing vulnerability to climate-related hazards, offering a viable pathway for achieving climate resilience.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article’s discussion on the economic impact of weather-related disasters, the role of climate change, and measures for protection and insurance directly connects to the following Sustainable Development Goals:

• SDG 11: Sustainable Cities and Communities

  This goal is relevant because the article focuses on the impact of weather disasters like flooding and severe storms on specific regions and communities, such as Germany’s Ahr Valley and the protection of Greater London. It discusses the financial losses incurred within these areas and the vulnerability of infrastructure to such events.

• SDG 13: Climate Action

  This goal is central to the article, which explicitly states that climate change is a driving factor behind the increasing frequency and intensity of certain weather events. It mentions that scientists assume severe thunderstorms are “on the rise due to climate change” in France and that Northern Italy is a region where “severe hailstorms are particularly on the rise due to climate change.” The article’s entire premise is about adapting to and mitigating the impacts of these climate-related hazards.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the issues discussed, the following specific targets can be identified:

• Target 11.5: Reduce the economic impact of disasters

  The article is almost entirely focused on this target: “By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including water-related disasters…” The text provides extensive data on the economic losses from weather disasters, such as the “US$ 42bn” loss from the Ahr Valley flooding and the varying percentages of losses caused by floods, winter storms, and thunderstorms across Germany, Italy, France, and the UK.

• Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards

  This target aims to “Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.” The article directly addresses this by contrasting the experiences of different countries. The UK shows a “downward trend in weighted weather losses,” partly attributed to adaptive measures like the “Thames Barrier” which has protected London since the mid-1980s. Conversely, the high “insurance gap” in countries like Italy (averaging 86% uninsured losses) indicates a lower financial resilience to these disasters.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article contains both direct and implied indicators for measuring progress:

• Direct Economic Loss from Disasters

  This is a direct indicator for Target 11.5. The article provides specific monetary values and trends for economic losses. For example, it quantifies the loss from the Ahr Valley flood at “more than US$ 42bn” and analyzes the upward or downward trends in “weighted losses” for each country. This data can be used to track the economic impact of disasters over time.

• The Insurance Gap

  This is an implied indicator for both Target 11.5 and Target 13.1. The insurance gap, defined as the percentage of total losses that are uninsured, measures a community’s financial vulnerability and resilience. The article provides precise figures, such as the “insurance gap was ca. 54%” in Germany and has narrowed in Italy from an average of 86% to “around two thirds of total losses” in recent years. A decreasing insurance gap indicates improved financial resilience and progress towards the targets.

• Effectiveness of Protective Infrastructure

  This is an implied indicator for Target 13.1. The article suggests that the downward trend in losses in the UK is partly due to “Improvements in flood protection,” specifically citing the “Thames Barrier.” The success of such infrastructure in preventing or mitigating losses serves as a qualitative and quantitative measure of a country’s adaptive capacity to climate-related hazards.

4. Table of SDGs, Targets, and Indicators

Source: munichre.com