Who's Going to Pay the Bill?

The floods that have ravaged parts of Central and Eastern Europe may leave more than physical devastation in their wake. Financial damage to businesses and homeowners will likely run into billions of dollars. But there is one group that will be footing an unexpectedly small proportion of the bill: insurance companies.

Consider these sobering statistics. In the 1999 floods in Bavaria, which caused $416 million in damage, the insured share of the loss was less than 10%. And when parts of the Czech Republic were flooded in 1997, wreaking almost $2 billion in destruction, insurance covered only 20%....

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