Insurance Companies Cash In On Fear – But Spanish Flood Data Over Last 40 Years Show No Increased Risk

Flood Analysis in Spain Shows No Trend In 40 Years

By Sebastian Lüning and Fritz Vahrenholt
(Translated by P Gosselin)

For years the insurance industry toldus that flooding was becoming more common. The main reasons was man and his CO2 emissions. Homeowners living near rivers got scared, and rushed to buy new insurance policies. The insurance companies beamed.

And the gig worked as long as nobody checked over the calculations made by the insurance companies. When objective science finally did take a close look, the surprise was big: Over the long term there was absolutely no detectable increase in flooding. The insurance companies had created fear among the homeowners for nothing. Actually “nothing” is the wrong word to use here because the new insurance policies weren’t for nothing.

In the jounal “Natural Hazards and Earth System Sciences” appearing in May Mai 2012, another regional study on flooding appeared. Jose Barredo of the Institute for Environment and Sustainability of the European Commission and two other colleagues studied the development of Spanish flood damages for the past 40 years. Indeed insurance damages for the period truly had gone up. However this was solely due to the increase in the insured value. A trend in flooding frequency and intensity was not found by the scientists.

Here’s the abstract of the study (emphasis added):

Economic impacts from floods have been increasing over recent decades, a fact often attributed to a changing climate. On the other hand, there is now a significant body of scientific scholarship all pointing towards increasing concentrations and values of assets as the principle cause of the increasing cost of natural disasters. This holds true for a variety of perils and across different jurisdictions. With this in mind, this paper examines the time history of insured losses from floods in Spain between 1971 and 2008. It assesses whether any discernible residual signal remains after adjusting the data for the increase in the number and value of insured assets over this period of time. Data on insured losses from floods were sourced from Consorcio de Compensación de Seguros (CCS). Although a public institution, CCS compensates homeowners for the damage produced by floods, and thus plays a role similar to that of a private insurance company. Insured losses were adjusted using two proxy measures: first, changes in the total amount of annual surcharges (premiums) paid by customers to CCS, and secondly, changes in the total value of dwellings per year. The adjusted data reveals no significant trend over the period 1971–2008 and serves again to confirm that at this juncture, societal influences remain the prime factors driving insured and economic losses from natural disasters.

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So profitable can global warming and fear be.