In addition to the human tragedy, the recent flooding in Germany also has an economic dimension. Flood damage is often not covered by insurance. In endangered regions, premiums for natural disasters caused by flooding or heavy rain are so expensive that residents often do without them. Politicians have long been fighting for natural disaster insurance. The individual states have been calling for action from the federal government since the Ahr Valley flood in 2021, but no progress has been made. But doing nothing is not an option.

At federal level, the FDP-led Ministry of Justice in particular is putting on the brakes. A central argument is that compulsory insurance cannot prevent major loss events. If people in flood areas were prepared to shoulder their own risks, that would be in line with economic liberalism. In reality, however, the state usually pays. Politicians in rubber boots trudge through the floods in a camera-friendly way– now including telegenic transparent umbrellas like Bavaria's Prime Minister Markus Söder (CSU) – and promise unbureaucratic assistance. But taxpayers are left to foot the bill for the damage. The flood disaster on the River Ahr cost around 40 billion euros – as much as the federal government pays in interest on its debt each year. Only 8.5 billion euros of this was covered by insurance.

Compulsory insurance has been under discussion for a long time. The Ministry of Justice does not believe that the burden on budgets is sustainable. There are solutions to the concerns raised. The danger of unconstitutionality has been averted, since natural disasters will increase in times of climate change – and not just affect individual groups. And insurers have developed a bureaucracy-friendly solution. For new and existing customers, natural disaster cover is integrated into homeowners' insurance, which the policyholder can only opt out of.

Premiums should be calculated according to the risk situation in the location. This makes it less attractive to build on cheap properties in high-risk locations with damage potential. A state fund can act as a backstop for major losses that exceed the capacity of the insurance industry. The European Stability Mechanism (ESM) has already made proposals for this, together with financial supervisory authorities, which would protect insurers and countries across Europe. The model must be designed in such a way that government agencies continue to have the incentive to engage in flood prevention. There are well thought-out approaches. The federal and state governments must implement them.