Understanding Precipitation Risks and Insurance Solutions

Today, businesses worldwide confront a new reality where weather patterns are becoming increasingly extreme, which is having a consequential effect on their operations. In Europe, for example, we see a stark illustration of these growing challenges. The European Commission reports that "due to the changing climate, many European regions are already facing more frequent, severe, and longer-lasting droughts," defined as "an unusual and temporary deficit in water availability caused by the combination of lack of precipitation and more evaporation (due to high temperatures)."

These droughts extend their impact far beyond the immediate environment, affecting various sectors including "transport infrastructure, agriculture, forestry, water, and biodiversity." Droughts reduce water levels in rivers and groundwater, impair tree and crop growth, increase pest attacks, and even fuel wildfires.

Additionally, the problem is not just one of insufficient precipitation. Some areas are projected to see an increase in rainfall, leading to its own set of challenges. The European Commission notes that "Increased rainfall over extended periods will mainly lead to fluvial (river) flooding, while short, intense cloudbursts can cause pluvial floods, where extreme rainfall causes flooding without any body of water overflowing."

The Rising Economic Toll

These precipitation extremes are not just environmental issues; they have tangible and escalating economic implications. According to the European Commission, roughly EUR 9 billion annual losses caused by droughts are currently felt by sectors  involved in  agriculture, energy sector, as well as public utilities e.g. water supply. Projected increases in temperature can double the occurrence of droughts and push the annual losses to an eye-watering EUR 40 billion. Floods, too, are a recurring economic burden, with heavy rainstorms projected to become more common and intense.

The Coverage Solution

Given this backdrop of rainfall extremes and the costly disruptions they bring, it's clear that businesses must consider coverage solutions as part of their risk management strategies. To that end, Arbol Insurance Services offers coverage solutions for both low and excess precipitation scenarios.

As the potential damages and disruptions caused by precipitation extremes escalate, so too does the imperative for reliable coverage solutions. Arbol Insurance Services' innovative product offerings provide businesses with sound tools to mitigate income losses so that they can thrive in a volatile environment.

To learn more, contact us here.