Underestimated Climate Risks: An interview with Roger Baumann and Immobilien Business

It is now widely known that there will be more heavy rainfall events in the future because warmer air masses store more moisture and therefore produce higher amounts of rainfall. So why should property owners have their properties inspected in detail for risks? Isn't it enough to simply invest more in flood protection—for example, by raising building entrances and waterproofing basements?

These comparatively inexpensive adaptation measures will not be sufficient for all properties at risk from heavy rainfall and flooding. In highly threatened locations, flood barriers and backflow valves will probably also have to be used. However, without a detailed risk analysis, property owners cannot know how high the risk potential is for each of their properties, let alone for their entire portfolio. To make matters worse, the risks accumulate in numerous locations. In many places, real estate is exposed to a multitude of threats.

For example, because in mountainous regions, towns are not only increasingly threatened by mudslides due to more frequent heavy rainfall, but also by rockfalls triggered by the thawing of permafrost?

The events in Blatten have clearly demonstrated how these factors can interact. Residents reported that a large boulder had broken off and rolled almost to the bottom of the valley. Fortunately, the first residents were evacuated from the municipality of Blatten on May 17. In the days leading up to this, ground movements had been detected in the glacier region. Eleven days later, the devastating rockslide occurred. Climate change is creating further threatening combinations. On the one hand, there are more and more heavy rainfall events, but at the same time, heat waves are becoming more intense. The latter cause the soil to dry out and become hard as concrete. If heavy rain then follows, the water cannot seep into the ground. The result is significantly more severe flooding, which puts many more buildings at risk than in the past.

The analysis by the Climate Resilience Team shows that strong wind events will be the most significant risk factor in the future ...

Global warming is causing storms to occur more frequently and with significantly greater destructive potential. This applies not only to tropical cyclones such as hurricanes and typhoons, but also to hurricanes and tornadoes that originate outside the tropics. The damage they cause is immense. Hurricane Katrina caused insurance losses of USD 62.2 billion in the US.

In addition, winds exacerbate the consequences of other damaging events...

We are seeing this more and more often. Storms can cause tidal waves and drive forest fires forward at high speeds. The latter was impressively observed in Southern California this spring. First, an eight-month period without any precipitation over the winter had dried out the soil and vegetation. When the first fires broke out, strong winds drove the flames forward at breakneck speed, destroying entire villages.

More than 30 people died and 18,189 buildings were destroyed. JPMorgan recently estimated the insurance damage at "more than USD 20 billion." Is real estate in the vulnerable regions of Southern California still insurable against forest fires?

Wildfires pose a major challenge for the insurability of real estate in Southern California. In particularly vulnerable regions, it is currently difficult for many insurers to offer adequate insurance coverage because the risks and damages have increased significantly. The basic principle of insurance is based on a balanced distribution of risk within a community. However, if the risk becomes too high for all members, this can jeopardize the viability of the system.

In other countries, too, real estate is no longer insurable against certain risks. In Greece, for example, this applies to fire in fire-prone regions, and in Germany to flood damage in areas where heavy rainfall is common. Could this also be conceivable for Switzerland, for example in mountainous regions?

The discussion on this topic will likely take place when debris flows and landslides become more frequent and the damage they cause continues to increase. In general, the higher the probability of a damaging event, the more difficult it will be for owners to obtain insurance policies for affected properties. This underscores the need to proactively invest in adaptation measures.

Places can be protected against extreme events. Avalanche barriers have been used successfully for more than 100 years ...

Correct. However, such costly adaptation measures are only possible in cooperation with the public sector. In future, the federal government, cantons, and municipalities will probably have to contribute more financially to the prevention of natural hazards. This is because climate change is increasing the likelihood of such hazards occurring. Furthermore, the example of avalanche barriers cannot be applied to all extreme events in general. Avalanches follow predictable paths due to the slope gradient. It is possible to determine exactly which houses or districts are at risk and where protective structures need to be built.

Does this not apply to other extreme events? Floods usually affect not only individual properties or neighborhoods, but entire areas, including infrastructure such as roads and power supplies. This is why very extensive adaptation measures are necessary in this case. Public-private partnerships are therefore likely to become increasingly important in order to manage the costs incurred in the long term. In Japan, new buildings have been constructed for decades in such a way that they can withstand even the strongest earthquakes. Can't new buildings also be designed to be immune to extreme weather events?

Of course, this is possible and is already common practice in high-risk regions. In flood-prone areas, for example, new buildings are equipped with robust ground floors and special protection systems. Some existing properties can also be modernized to provide better protection against threats. However, this is currently only happening by looking in the rearview mirror. New buildings are being constructed and existing properties are being upgraded in areas where extreme events have occurred in the past, highlighting the threat.