Does insurance cover natural disasters?
With climate change, natural disasters are becoming more frequent. And it is not always your insurance that is responsible for compensating you when any of your insured property suffers damage.
Climate change is causing increasingly extreme weather events. Long periods of drought and record high temperatures sometimes give way to heavy rain or hailstorms. One example is the hailstorm that hit regions such as Baix Empordà, Gironès and Pla de l’Estany at the end of August. The hailstones, some of which more than ten centimetres in diameter, even caused the death of a 20-month-old girl.
Beyond the impossibility of compensating for such personal misfortunes, insurance policies may cover some material damage linked to natural disasters, but they do not necessarily cover all of it. Moreover, the characteristics of the incident will determine whether we have to be compensated directly by our company or by the Insurance Compensation Consortium. This entity covers extraordinary risks in the event of certain natural catastrophes. However, only and exclusively in the event that the affected property is insured.
Damage to vehicles and homes caused by hail or hailstone, very typical at the end of summer, is not covered by this “extraordinary risk” coverage. Therefore, it is our own company that should compensate us according to the coverage contracted. If our car insurance includes windows, we can claim for windows damaged by hail. But dents in the sheet metal will only be compensated if we have comprehensive insurance.
As for damage to crop fields and livestock or livestock farms, these are not covered by the Consortium either. There is a state system to cover them, the Agroseguro, which gives the right to economic compensation if we have insured any of these areas against a specific meteorological phenomenon and are damaged by it.
What does the Insurance Compensation Consortium cover?
This entity is responsible, among others, for damages to our insured goods caused by extraordinary floods, earthquakes, tidal waves, volcanic eruptions, atypical cyclonic storms and the fall of sidereal bodies or aerolites.
Of the above natural catastrophes, floods cause the most damage in Catalonia. And, for the purposes of coverage, they are considered as “the flooding of land caused by rain or thawing; by water from lakes with a natural outlet, from estuaries or rivers, or from natural watercourses on the surface when they overflow their normal channels”, according to the Consortium itself. It also includes the impact of the sea on the coast, even if there is no flooding.
It should be taken into account that this concept of flooding does not include rain falling directly on the insured risk, or that collected by its roof or rooftop, its drainage network or its patios, nor flooding caused by the bursting of dams, canals, sewers, collectors and other artificial underground channels unless the bursting has occurred as a direct consequence of the extraordinary event covered by the Consortium.
In the case of an atypical cyclonic storm, tornadoes and extraordinary winds, characterised by gusts of more than 120 Km/h, are included, among others.
The insured person is fully entitled to compensation, even if the public authorities do not issue an official declaration of “catastrophe” or “catastrophe zone”. However, in order for this body to cover damage caused by earthquakes, tidal waves, volcanic eruptions and falling sidereal bodies or aerolites, it must be certified by the National Geographic Institute or the competent public body in the matter.
When does the Consortium not cover the damage?
According to the Regulation of the Insurance of Extraordinary Risks, we will not be entitled to compensation from the Insurance Compensation Consortium despite having insured the damaged property in some circumstances.
One of the cases is when the insurance contracted is for the transport of goods, construction and assembly, civil liability, health, legal defence or travel assistance. The same exclusion applies to policies covering agricultural production that can be insured through the Combined Agrarian Insurance system.
As for the type of damage, for example, those caused by alterations in the supply of any kind of energy are not covered. Neither is the loss of profits as a consequence of damage suffered by other goods or by other natural or legal persons other than the insured person covered.
How the Consortium is financed
The Insurance Compensation Consortium, which depends on the Ministry of Economic Affairs and Digital Transformation, is financed by a percentage of each vehicle and home insurance policy that is taken out.
It is important to bear in mind that this type of compensation has nothing to do with the aid that may be offered by public administrations in the event of declaring a specific area of the territory a “catastrophic zone” due to some extreme meteorological effect.
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Germany faces a historic energy crisis that could cripple its important export base, trigger a recession, and threaten to cause a domino effect on the rest of Europe. Much of the problem is self-inflicted and demonstrates the dangers of following the sanctions policies dictated by the United States.
Germany remains, along with France, the EU’s main engine and the world’s third-largest exporter, behind the United States and China, which is in first place. Still, the trade wars initiated by the United States and the subsequent sanctions and counter-sanctions between the EU and Russia have combined with the logistics and supply crisis resulting from the pandemic to finally shake the foundations of the German economy.
German economists and industry groups warn that rising energy prices, 35.6 per cent higher than in the same period last year, pose a growing risk to the small and medium-sized enterprises that form the basis of the economy. A German industry almost paralysed by energy shortages, significant price rises and runaway inflation of 7.9 % is among the economic data suggesting that Germany could be heading for an economic recession, if it has not already entered a recession in the last quarter.
A survey of companies conducted by the German industry association (BDI) between mid-August and early September painted a bleak picture of the sector, with a third of companies saying their existence was threatened by rising prices and almost 25% considering the option of relocating part of their business, or in the process of doing so.
The inevitable cost pass-through to businesses and consumers
The German government is sending out often contradictory messages that are fuelling public unrest. On the one hand, Economy Minister Robert Habeck stated in mid-August that Germany must reduce its gas consumption by 20 per cent if it wants to avoid energy shortages this winter. A figure that can only be achieved if the industrial activity is considerably reduced.
On the other hand, after criticism from economists and businessmen, a few days later he announced that German gas tanks are almost 83% full and will reach 85% of their capacity in early September, well before the self-imposed October limit.
In this context, Olaf Scholz’s government has agreed on a new economic aid package of more than 65 billion euros to alleviate the impact of the energy crisis on the population, which will be of little use when after rescuing Uniper, Germany’s leading gas supplier, the same will have to be done with the country’s second gas company, VNG, which ensures a new blow for consumers when, from 1 October, the energy companies will have the go-ahead to raise the price of bills again.
Winners and losers
While oil-producing countries are making a killing, Europe is sinking and preparing for a winter where it looks like it will barely be able to keep the lights on. Sanctions on Russia have proved more effective in countering the European economic recovery than in weakening a Russian economy that is all and sundry and the reduction in hydrocarbon exports to Europe is reaping record profits thanks to higher prices because of the restrictions imposed by the United States and the European Union.
At the same time, the United States has become the world’s largest exporter of liquefied natural gas (LNG) in the first half of 2022. The business is extremely lucrative, as it sells this gas three times more expensively to Europe and weapons in countries adjacent to Ukraine.
The geopolitical tug-of-war between the US and Russia or China is inevitable. It is even understandable, given the US interest in wanting to stem the loss of its hegemonic power in the face of an increasingly multipolar world. What is surprising is the EU’s foreign policy servility.
The energy crisis, and more specifically the gas crisis, was easily avoidable. The EU and specifically Germany, could have refused to participate in the US tactical war against Russia, which spurred the energy crisis by halting the Nordstream 2 pipeline. Now, without a clear supply alternative, since the EU had also stopped the MidCat pipeline, German industry will be hard-pressed to maintain its productivity. Germany’s ability to generate an economic surplus is key to the financing of the EU and dependent countries like Spain. What will happen if Germany is no longer able to sustain the European economy with its profits? Winter could be very difficult, not just in Germany.
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