Europe’s changing flood reality is creating a new challenge for insurers

Europe’s changing flood patterns create hidden concentrations of risk in smaller, less-protected communities, challenging insurers to rethink where future losses might emerge, explains Gallagher Re’s Dave Egan.

Key points:
Flood losses are shifting
Hidden accumulations in new areas
Analytics can identify future hotspots

By Dave Egan, head of international property practice group, Gallagher Re

A new flood story is emerging across Europe. For many years, the re/insurance industry’s understanding of flood risk was shaped by major river flooding events that affected the largest cities.

The floods of 1997, 2002, and 2013 remain defining events, not only for the losses they generated, but because they reinforced a perception that Europe’s most significant flood risks were concentrated along major river systems and within densely populated urban centres.

Today, however, loss patterns suggest this picture is changing. While flood remains a major natural catastrophe peril, an increasing proportion of insured losses are emerging from different locations. Rather than being concentrated along the continent’s largest waterways, recent events have been driven by intense rainfall affecting smaller catchments, secondary towns, suburban developments and rural communities.

Accumulation risk

This shift matters because it changes not only where losses occur, but also how insurers need to think about accumulation risk.

In many respects, the industry’s historical focus on major urban centres has delivered positive outcomes. Large flood events during the late 1990s and early 2000s prompted significant investment in flood defences, drainage infrastructure and floodplain management across Europe. Re/insurers also refined underwriting strategies, improving their understanding of flood exposure and reducing concentrations of risk in repeatedly affected areas.

The benefits of these investments were evident during Storm Boris in 2024. A slow-moving weather system produced prolonged rainfall across Central Europe, creating conditions similar to some of the region’s most significant historical flood events. Yet despite the scale of the hazard, losses were materially lower than might once have been expected.

Analysis undertaken by Gallagher Re indicates that modern flood defence infrastructure significantly reduced impacts in several key locations, while cities, including Prague and Vienna, avoided the catastrophic flooding experienced in previous decades.

Taken in isolation, this is a positive story about resilience and adaptation. However, the industry has also witnessed a growing number of loss events originating outside major river corridors, driven by extreme rainfall and resulting in surface water flooding, flash flooding or rapidly responding river systems that affect communities with lower levels of protection and a more limited history of significant insurance losses.

Germany provides a clear illustration of this trend. While the country’s best-known flood events remain associated with the Elbe, Danube and Rhine, analysis from the German Insurance Association shows that most significant flood events recorded since 2002 were driven primarily by heavy rainfall and flash flooding. Collectively, these events have generated a greater share of insured losses than their larger river-driven counterparts.

Storm Bernd in 2021 demonstrates why this matters. Unlike the floods of 2002 or 2013, Bernd did not primarily affect major metropolitan centres. Instead, some of the greatest destruction occurred in relatively small catchments and communities, many with populations of fewer than 50,000 people. Nevertheless, it became the costliest flood loss in modern German insurance history, highlighting how severe losses can emerge from locations previously considered peripheral to the industry’s view of flood risk.

This redistribution of losses creates a significant challenge and exposes the limitations of relying on historical experience alone. Many emerging exposure hotspots exist outside areas traditionally associated with peak flood accumulations.

As rainfall-driven events become a more prominent driver of natural catastrophe losses, insurers face a growing risk that concentrations of exposure might develop unnoticed across multiple smaller locations, only becoming apparent when a major event occurs.

“Insurers need analytical tools capable of identifying where risk might be accumulating.”

Flood risk assessment

Adding to the challenge is that, for many cedants, retentions have increased since 2022. Although frequency covers are now returning for a lot of insurers, they are not at the same level they once were. Although some frequency covers have returned, they remain the exception rather than the norm.

Understanding this evolving landscape requires a forward-looking approach to flood risk assessment. Historical claims data remains valuable, but it doesn’t provide a complete picture of future exposure in a world where hazard, resilience and development patterns are changing. Insurers need analytical tools capable of identifying where risk might be accumulating today, rather than simply where losses occurred yesterday.

It is this challenge that we explore in Gallagher Re's forthcoming white paper, ‘A risk in flux: Exploring Europe's changing flood reality for insurers’. Drawing on analysis from Gallagher Re’s Europe Flood Model, underpinned by KatRisk’s flood hazard data, the research examines how flood losses are being redistributed across the continent, the accumulation risks this could create and how advanced flood analytics can identify emerging exposure hotspots and support more proactive decision-making.

The question facing the market is no longer whether flood will remain a major driver of insured losses across Europe, but whether insurers can adapt their understanding of risk to reflect a flood landscape that is becoming increasingly dynamic, dispersed and complex.

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