In October 2024, the city of Valencia (Spain) was overwhelmed by record flooding, causing exceptional human and material damage. These events were part of a particularly significant year for the insurance sector. In fact, 2024 ranks among the three most costly years since 1980 for reinsurers, with insured losses estimated at $140 billion, according to German reinsurer Munich Re, a cost detailed here.
Devastating storms, historic floods, prolonged droughts, and intense wildfires highlight the growing impact of climate change on individuals, businesses, and insurers. With claims becoming more frequent and costly, the need to review insurance policies has never been more apparent.
For insurers, this new reality obviously requires adaptation. Between innovations, premium increases, and cooperation with public authorities, the sector is exploring new solutions to continue to effectively protect policyholders. As an intermediary in the insurance sector, the RGF Group is committed to supporting its individual and corporate clients in anticipating these challenges and optimizing their coverage in this context of change.
Rapidly growing risks: a collective responsibility
According to experts, economic losses due to natural disasters are increasing at an alarming rate. In Belgium alone, the floods of 2021 cost more than €2 billion, an amount that is difficult for (re)insurers to bear alone. These rising costs are prompting the sector to consider solidarity mechanisms.
A recent report by the Belgian Insurance Federation highlights the need for a public-private partnership to better distribute risks. Such a system would ensure fair coverage while stabilizing premiums for policyholders. The idea is inspired by models already in place in other countries, such as France, where the state covers part of the compensation. For more details on this issue, see the RTBF article.
The evolution of insurance premiums is another crucial issue. While some policyholders are already seeing increases, projections indicate that premiums will continue to rise if disasters become more frequent. However, insurers point out that these increases are not solely related to climate-related claims. Inflation and rising raw material costs also influence rates.
Innovation at the service of insurance
Faced with rapidly evolving risks, insurers are innovating to meet the needs of individuals and businesses. These solutions include:
- Parametric insurance: policies pay out automatically when a specific climate threshold is exceeded (temperature, precipitation, etc.). This system reduces compensation delays and simplifies the process.
- Sustainable insurance: insurance for solar panels, charging stations, and electric cars is becoming increasingly common. These solutions enable individuals and businesses to secure their investments in the energy transition.
- Contract customization: coverage is now adjusted according to geographical risks and specific needs, such as for businesses located in flood-prone areas or exposed to storms.
These innovations show that insurance is adapting not only to cover risks, but also to encourage responsible and sustainable behavior.
Why review your insurance policies?
Many policyholders believe that their current policies are sufficient. However, climate change is profoundly altering risk profiles. Reviewing your insurance policies regularly is essential for several reasons:
- The evolution of risks: what was once rare (floods, violent storms) is becoming frequent.
- Life changes: installing solar panels or buying an electric vehicle involves specific needs.
- Financial optimization: periodic reviews allow you to adjust your coverage and avoid paying for unnecessary coverage.
The specialists at RGF Group will support you in this process by helping you identify the best solutions for your current needs.
A public/private partnership: one possible avenue
As mentioned, in a context where natural disasters are becoming increasingly frequent, it seems clear that insurers cannot bear the entire cost alone. For this reason, the idea of a public-private partnership is gaining ground in Belgium.
With this in mind, the government would step in to cover part of the most costly claims, thereby ensuring national solidarity. Insurers, for their part, would maintain their role as risk managers by adapting their offerings and actively encouraging preventive measures among policyholders.
Such a system would offer several advantages, including:
- Increased premium stability for policyholders;
- Greater resilience to climate crises;
- Stronger solidarity between regions and sectors.
However, establishing such a partnership is not without its challenges. Discussions between insurers and public authorities must result in a clear division of responsibilities and funding. It is essential that this mechanism is perceived as fair by citizens and businesses, without entailing heavy additional tax burdens.
Updating your insurance coverage
Climate change represents a major collective challenge. It is disrupting many sectors, including insurance, but it also offers an opportunity to rethink traditional approaches in order to offer fairer and more sustainable solutions.
The RGF Group understands how important it is to provide tailored monitoring and support. Whether you are an individual, a self-employed professional, or a business leader, we are here to help you assess your needs, optimize your coverage, and protect you effectively against the vagaries of the weather.
To find out more or to discuss your specific needs, contact us today.
By Julie G
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