What Switzerland can learn from Norwegian natural disaster management

The study, entitled "Weathering the Storm: The Effects of Natural Disasters on Households under Universal Insurance", is based on extensive administrative data from Norway, where all buildings and movable property are automatically insured against natural disasters. This provides a unique opportunity to estimate the indirect effects of the disaster. Immediately after a disaster, the insurance company reimburses almost all property damage – a system that only exists in part in Switzerland. A team of researchers from Switzerland and Norway has investigated what happens afterwards. "Using data from Norway, we were able to isolate the indirect economic consequences of natural disasters for the first time," explains Emilia Garcia-Appendini, Professor of Banking and Financial Intermediation at the University of St.Gallen (HSG). "It turned out that even with full compensation, households permanently experience a large loss of their wealth."

Income falls, houses lose value 

The results are sobering: four years after a storm or landslide, the incomes of the affected households are on average 16 % below the value of the direct damage. In the authors’ most conservative estimates, consumption falls by 1,460 USD instead of originally 720 USD. Homeowners are particularly hard hit: they reduce their consumption much more sharply than tenants – a consequence largely due to the decline in property values.
 
Another key finding of the study concerns the labour markets. "When disasters strongly affect companies, unemployment figures in the affected region rise significantly in the short term," says co-author Sigurd Mølster Galaasen of Norges Bank. This shows that the economic shock goes far beyond the destroyed buildings. Although insurance covers the repair of property, it does not compensate for the loss of income due to production losses or falling demand. 

The principle of solidarity: both a strength and a weakness 

The Norwegian model is based on a principle of solidarity: all insured persons pay the same premium, regardless of their individual risk. This uniform premium approach is politically controversial, explains Emilia Garcia-Appendini, but it has an economically stabilising effect: "It prevents high-risk areas from becoming uninsurable." According to the researchers, this should be discussed in Switzerland. 
 
Although the Swiss model is regarded as a benchmark internationally, the increasing frequency of extreme events is putting its viability to the test. The floods of 2005 were a turning point for Swiss insurers, as the Swiss Insurance Association (SVV) emphasises in a report. Since then, prevention, risk models and reinsurance have been massively expanded. Nevertheless, the question remains as to whether solidarity between cantons and policyholders can be maintained in the face of future climate extremes. A Norwegian-style nationwide system would have advantages here, particularly in terms of data availability and long-term planning. 

"Insurance alone does not protect against loss of prosperity," concludes Emilia Garcia-Appendini. "What counts is economic resilience – in other words, how quickly income, employment and consumption recover after a disaster. However, the Norwegian experience suggests that recovery can be slow." This insight is also likely to be significant for Swiss politics, as the Confederation has a somewhat fragmented insurance regime. 

Symposium in Oslo: international stage for climate risks 

The results of the study will also be discussed at the online-streamed symposium in Oslo on 21 October 2025. The Norges Bank Climate Conference is one of the most internationally renowned symposiums on climate and finance. Participants include Christine Lagarde, Al Gore, Bård Harstad (Stanford) and Kristin Halvorsen (CICERO). Study author Emilia Garcia-Appendini from the University of St.Gallen will present the results of this research. The aim is to develop viable ways of achieving a stable financial architecture in the age of climate risks. 
 
So while Norway is highlighting the limitations of even a universal insurance system, Switzerland is faced with the task of rethinking prevention, solidarity and economic adaptation – before the next natural disaster puts it to the test. 

Study for download

Image: Adobe Stock / Mor65_Mauro Piccardi