Insurance companies: «Emergency funds for residual risk»

Switzerland also counts on insurance companies in dealing with natural hazards. Insurance firms step in when damage occurs despite all the precautions taken. Solidarity between policyholders and regions is key here. Damage caused by earthquakes is an exception – there is no insurance cover for this type of hazard.

Text: Kaspar Meuli

© Pixabay/annca

We are talking about money. Large sums of money. The storm of August 2005, for instance, caused record damage costing over 3 billion Swiss francs. On average, floods, debris flows, landslides and rockfalls cause damage worth 305 million Swiss francs per year. But we are also talking about suffering. Since 1945, over 700 people in Switzerland have lost their lives because of the above mentioned natural hazards and avalanches.

Thanks to more effective protective structures, forward-looking land-use planning, tighter building regulations and well-organised emergency planning, it has been possible to avert much suffering and damage over the past few decades. “Switzerland is doing everything possible in terms of planning, technical, organisational and financial measures to reduce the risks to a tolerable level”, says Roberto Loat, a natural hazards specialist at the FOEN. The residual risks are covered by the insurance companies – with the exception of damage caused by earthquakes. Alain Marti, deputy director of the Union of Cantonal Building Insurance Companies (VKG) explains, “Insurance is not a substitute for other measures. We are part of the integrated risk management approach that Switzerland has been pursuing for 30 years.”

A new philosophy

The term risk management signals a fundamental shift in Switzerland’s approach to dealing with natural disasters. The trigger was the 100-year flood of 1987, which burst dams and submerged the entire Reuss plain. “Before this event, people believed they could control the threat with maximum quantities of steel and concrete”, says Roberto Loat. “But it is now clear that we have to be more sustainable in dealing with natural hazards.” What is needed is a way of dealing with risks that includes planning and organisational measures, rather than just technical protective structures.

Responsibility for natural hazard protection has to be shared by a large number of organisations and individuals. In this philosophy, homeowners, architects and builders have a role to play alongside the authorities – and so do the insurance companies. “The public and private insurance companies have been working closely with the public administration for years”, Alain Marti stresses. “We coordinate our measures.” One result of this joint approach is the surface runoff risk map that was completed in 2018 (see Protecting property article).

Switzerland is proud of its financial safety net for natural disasters, which is the only one of its kind in the world. Its natural hazard insurance is based on the concept of solidarity, which is the only way for people in particularly high-risk areas to access affordable insurance cover. The principle is that everyone pays the same amount and because the risk is spread over a very large number of policyholders, the premiums are low. The Swiss Insurance Association (SIA) explains this fundamental principle in a brochure as follows: “The risks of natural hazards in Switzerland are unevenly distributed – the Swiss Plateau is more likely to suffer from floods, hail or storms, while mountainous areas are more at risk of rockfall processes, landslides and avalanches. However, because natural hazard insurance covers nine different types of hazard, all private and corporate policyholders benefit from it equally.”

Natural hazard insurance is not a personal choice in Switzerland – it is mandatory for homeowners. Nineteen cantons also specify the insurance company to be used: the non-profit cantonal building insurance organisations. The situation is different in the cantons of Geneva, Uri, Schwyz, Ticino, Appenzell Innerrhoden, Valais and Obwalden. Here, damage to buildings is covered by private insurance companies, but premium levels are prescribed by the federal government. It is important to know that natural hazard insurance only covers damage to buildings. If third parties suffer losses – for instance if tiles are ripped off a roof in a storm and damage a car – it is the homeowners who are liable. Special building liability insurance policies are available to cover this risk.

Insurance companies: more prevention

The insurance companies do not limit themselves to settling claims, however. As part of the integrated risk management approach, they are increasingly involved in prevention as well. “In view of climate change, our role in this area will continue to increase”, explains Gunthard Niederbäumer, head of indemnity insurance and reinsurance at the SIA. He explains that climate change will alter the hazard situation. “Through our involvement in prevention we want to work with our partners to strengthen Switzerland’s resilience”, he adds.

The prevention measures include providing advice to homeowners – with tips on installing storm-resistant shutters or protecting basement windows against surface runoff – and offering financial incentives. The cantonal building insurance organisations alone invest around 80 million Swiss francs per year in property protection measures. Some insurance companies are involved in prevention at an even earlier stage. The Zurich insurance company, for instance, offers its customers a “natural hazard radar” that they can use to carry out “an informed site and property analysis”. The Helvetia insurance company supports tree planting in protection forests (170,000 trees have been planted in 16 regions since 2011), and the Mobiliar insurance company finances a research centre at Bern University: the Mobiliar Lab for Natural Risks. Among other things, the lab conducts research into the vulnerability of buildings and the basic principles of warning systems.

The exception: earthquakes

The fact that Switzerland could experience earthquakes is something the public is barely aware of. Even less well known is the fact that earthquake damage is not covered by building insurance – with the exception of the canton of Zurich, which offers limited insurance cover against earthquakes. In 1978, 18 cantonal building insurance organisations joined forces to form a Swiss pool for earthquake insurance.

The pool is endowed with 2 billion Swiss francs (the total value of insured buildings in Switzerland is 2,000 billion Swiss francs) and functions as a relief organisation for the participating cantons. The attempt to introduce mandatory nationwide insurance for earthquakes has repeatedly failed to receive the support it needs in Parliament. This means that earthquake damage can still only be insured against privately.

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Last modification 03.06.2020

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