New types of damage caused by climate change

Climate change is leading to more extreme weather conditions that increasingly cause damage. In the Netherlands, we are experiencing longer periods of drought and heavier rainfall more often. The effects are also noticeable in the commercial real estate market and can impact business performance and continuity. Owners, operators, and property managers therefore need to be aware of the new risks. What is and isn’t covered when it comes to flooding, extreme rainfall, drought, and storms?

Flooding

Due to the low-lying nature of the Netherlands and its many rivers, there is an increased risk of flooding caused by extreme rainfall or melting glaciers. Insurers distinguish between primary and secondary flood defences. Primary flood defences protect against flooding from external waters. In such cases, the Disaster Compensation Act (Wts) applies. Businesses cannot insure themselves against this type of flooding, but they may be eligible for government compensation for damage that is uninsurable, unavoidable, and non-recoverable. Secondary flood defences protect against flooding from internal waters. These types of floods are increasingly being covered by insurers.

Extreme rainfall

When it comes to damage caused by rainfall, insurers distinguish between direct and indirect damage. Direct damage results from the rainfall itself or from water entering the property directly from the street. Indirect damage occurs when ditches or canals overflow due to heavy rainfall. In many cases, insurance policies cover both types of damage. 

Note: damage caused by rising groundwater levels is usually not covered.

Drought

Rising temperatures increase the likelihood of prolonged dry periods. This causes the groundwater level to drop and reduces water drainage. The impact on buildings can include subsidence and collapse, with foundations suffering from pile rot and cracks forming in walls or facades. Insurers often do not cover damage caused by subsidence or collapse, as these gradual processes are generally considered uninsurable.

Storm

Climate change is causing storms to occur more frequently. A storm is defined as having wind force 7 or higher. It is possible to insure buildings and contents against storm damage. This is even a standard coverage under Meijers’ Extended Perils Insurance. Damage to fences and items attached to the building can also be covered. In addition, business interruption can be insured, although damage due to poor maintenance is usually not covered. Damage caused by solar panels being blown off the roof is often covered under debris removal costs

Added value of a broker

Insuring risks related to climate change remains a complex matter. Insurers do not cover all climate-related risks and typically only insure against sudden and unforeseen events. In some cases, the government provides a safety net instead. Property owners and operators would be wise to work with a risk management specialist to assess whether their location or project is situated in a high-risk area. Advising on the risks of extreme weather also falls under the duty of care of insurance brokers.

Meijers has all the expertise and experience you need

• Advice on preventive measures
• Guidance on how to best insure climate risks to minimise future damage
• Creating awareness around climate-related risks and sharing knowledge