Denmark mulls making flood cover compulsory

Four storms, including July flooding<BR>in Vallensbaek, have hit Denmark<BR>since November. The Danish Storm<BR>Council says claims could reach $92<BR>million. / AP PHOTOS

COPENHAGEN, Denmark—After the worst flood losses in years, Denmark is to consider a proposal that would require property owners in areas most at risk from coastal floods to buy insurance.

The Danish Storm Council, a government administered storm-related sea flood insurance pool, made the proposal because it views the current government-backed system as inadequate to handle claims in the event of a string of major floods, said Mads Molgaard Brauner, the secretary to the council.

The mandatory insurance proposal is likely to increase premium spending for small and midsize companies, but not for large Danish companies, which tend to have flood cover under international policies, said Suzanne Svendsen, vp at Marsh Denmark in Copenhagen, part of New York-based Marsh Inc.

Floods in Denmark have led to 4,100 damage claims from a total of four storms since last November, according to the Storm Council. The Storm Council estimates the total claims will amount to about 500 million kroner ($92.0 million).

Most of those losses stem from a single storm in November, from which there were roughly 3,900 claims, Mr. Brauner said.

In the course of this single season, more damage has been caused by the storms than during the 16-year existence of the current system, he added.

The current government system, which was enacted in 1991, is financed by private insurance companies, which pay 20 kroner ($3.68) for each fire policy, whether from a homeowner or business. Sea flooding is therefore covered by the government system, not the insurers.

The council said that claims from the recent storms almost exhausted the fund, although the pool can go to the government to make up any shortfall. Under the circumstances, the council in May recommended to the country's minister of economic and business affairs that the current system—and the law on which it is based—be updated.

"One particular point made by the council is that the Act does not, to a sufficient degree, take into account the possibility of a string of very serious storm floods—for instance as a result of climate changes—(which) may in the future entail very costly claims," said Mr. Brauner.

The council suggested the introduction of a mandatory insurance system to cover property in high-risk areas, with the amount of premium dependent on whether the policyholder has taken precautionary measures to prevent damage, Mr. Brauner said. Under the proposal, the Storm Council would continue to provide flood insurance in low-risk areas.

The council has also suggested using existing technology to define the major flood risk areas in Denmark for insurance purposes.

The council expects a response to its proposal by the fall, at which time the ministry may choose to change the law. Any legislative change would need to be passed by the Danish Parliament, according to the council.

Denmark has also experienced an increase in flood damage from streams and lakes, which is not covered by the government system. Therefore the council, in cooperation with Danish insurance companies and the Danish government, is considering whether to insure this damage as well, Mr. Brauner said.