Extreme weather damage: Austrian Court of Audit calls for stricter building restrictions in hazard zones

The climate crisis is increasing the frequency and intensity of extreme weather events. As a result, the number of potential storm days and days with heavy rainfall has risen in Austria. In its report „Extreme Weather Damage in Austria“  („Extremwetterschäden in Österreich“) published today, the Austrian Court of Audit (ACA) calls for a general insurance obligation against damage caused by extreme weather events. The option to insure against extreme weather damage has not been fully harnessed. According to estimates, only around five per cent of private individuals and businesses are insured against flooding. The government should therefore develop an insurance model to cover the damage, providing for appropriate compensation and reasonable deductibles. Due to differing regulations, individual provinces provide varying different levels of financial aid to private individuals in the event of a disaster. With regard to prevention, the ACA recommends an explicit ban on new construction in hazard zones or, alternatively, more stringent building restrictions. In addition to the relevant ministries, the ACA also carried out sample audits of the provinces of Carinthia and Tyrol. The audited period covered the years 2019 to 2023.

Over the past 25 years, there have already been four major flood events causing considerable damage in Austria: in 2002, 2005, 2013 and, most recently, in September 2024. According to the OECD, flood risk is the greatest challenge for Austria in adapting to climate change. The provinces of Carinthia and Tyrol were the most severely affected by torrential rain and avalanches in Austria during the audited period. The flood disaster in September 2024 occurred after the ACA had completed its audit.

Damage in Tyrol 1.6 times higher than in Carinthia 

There is no systematic and comprehensive overview of damage caused by extreme weather events in Austria. According to an assessment by the ACA, damage in Tyrol amounted to approximately EUR 315.46 million between 2019 and 2023, which was around 1.6 times higher than in Carinthia, where damage totalled EUR 194.46 million. 

Households and businesses receive financial aid from the provinces in the event of damage caused by extreme weather events. The Federal Government reimburses the provinces for 60 per cent of this aid from the Disaster Relief Fund. Due to differing regulations, the provinces provide varying levels of financial aid to private individuals in the event of a disaster. For example, between 2015 and 2023, financial aid provided by the provinces of Carinthia covered an average of 31 per cent of damage to private property, while in Tyrol the average coverage was 63 per cent. 

Flooding: Only about five per cent of private property is insured 

The ACA recommends developing a suitable insurance model to better cover private damage caused by extreme weather events.

Farmers can insure themselves against damage to agricultural crops, for example with hail insurance. Between 2012 and 2022, hail insurance covered an average of 56 per cent of the damage incurred.

Private households and businesses can obtain coverage through natural disaster insurance. The level of insurance coverage is not precisely known and varies depending on the risk. According to an estimate from 2022, only around five per cent of the value of private households and businesses was insured against flood damage. As a rule, the amount insured for flood damage was capped at EUR 10,000. In flood-risk areas, obtaining insurance was in some cases excluded. 

Despite subsidies and insurance, private individuals and businesses bear part of the damage themselves

This indicates, on the one hand, a low level of public awareness of the importance of precaution through insurance coverage, and, on the other hand, it points to the specific characteristics and limited options available for insurance cover against flooding. In France and Switzerland, insurance against flood damage is compulsory. The ACA therefore recommends that the Federal Ministry of Finance, together with the provinces, raise public awareness of the fact that damage caused by extreme weather events, and in particular by flooding, is only partially covered by state aid and natural disaster insurance.

A general compulsory insurance scheme against damage caused by extreme weather events could reduce the tendency to take out insurance primarily when living in high-risk areas, or to forego insurance where state aid is available. It could enable the insurance of existing properties in hazard zones and increase the rate of loss coverage at affordable premiums by enlarging the risk pool – that is, a sufficiently large number of insured units. 

The ACA recommends that the Federal Ministry of Finance and the Ministry of Agriculture, in consultation with other relevant ministries, the provinces and other stakeholders, develop a suitable insurance model to better cover damage caused by extreme weather events and work towards a legislative draft with the aim of providing adequate compensation and reasonable deductibles. International experience should be taken into account in this process.

Taking preventive measures

Regulatory and technical preventive measures can be taken to protect against damage caused by extreme weather events. Regulatory measures include the hazard zone plans of the Forest Engineering Service for Torrent and Avalanche Control, which identify risks but do not give rise to comprehensive building bans in particularly high-risk areas. The ACA recommends considering an explicit ban on new construction in red hazard zones and advocating more extensive building restrictions in yellow hazard zones. Red hazard zones are areas that are so exposed to torrents or avalanches that their permanent use is either not possible or only possible at a disproportionately high cost. Yellow hazard zones comprise all other areas where permanent use is impaired due to the risk of torrents and avalanches.

Disbursements from the Disaster Relief Fund amounted to EUR 440.97 million in 2023. Between 1995 and 2023, the Federal Government provided a total of EUR 5.893 billion through the Disaster Relief Fund for preventive measures (accounting for 59 per cent of the funds disbursed from the Disaster Relief Fund). However, absolute protection against flooding is not possible.