Houston is a microcosm of the flooding problem in the United States. Combine population growth with aggressive development in an area at high risk for severe weather and you increase the odds of unchecked economic losses. More concrete means inadequate drainage, and whether it’s a thunderstorm or a hurricane with storm surge, the water goes where it’s not welcome and is certain to do damage.
Hurricane Harvey brought the issue home, and unfortunately it takes a disaster of this magnitude to call attention to the inadequacy of flood insurance as we know it. The latest sigma report from Swiss Re reveals that about 80% of homes in the Houston metropolitan area are uninsured against flood risk. Houston is the nation’s fourth largest city, so that’s a large number of the US population.
Here are some other Harvey numbers that illustrate the urgency of the problem:
- 200,000 homes flooded
- 500,000 cars destroyed
- 56 inches of rain, the most rainfall from a US hurricane in recorded history
- USD 85 billion in economic losses, of which only USD 30 billion was insured
We talk continually about closing the protection gap and leaving a more resilient world for future generations, and clearly we need to start with flood. Houston isn’t unique; the problem exists in other communities across America. Flooding is an unwelcome and destructive force in low-lying areas and flood plains, especially in or near growing towns and cities that experience any kind of sustained rainfall. More than 20% of flood claims come from properties outside of the high risk flood zones. That’s not to mention hurricanes and “cluster events” like Harvey, Irma and Maria, which came in quick succession and caused widespread flooding in a matter of hours.
Given this pervasive threat, it’s surprising that only about 15% of US homeowners has a flood policy. The US experiences average economic losses of about $15 billion from flooding each year, of which only $5 billion is insured, resulting in a protection gap of approximately $10 billion.
When you consider the size and breadth of the US insurance industry with its combined modeling capabilities, underwriting acumen and financial strength, it’s imperative that a healthy private market for flood risk be created. Swiss Re wants to lead the way. We’re ready to help our clients offer flood coverage at rates that are commensurate with the risk.
We’ve developed a proprietary flood model that generates premiums based on the unique characteristics of the exposure such as location of the structure, type of construction and insured value, instead of relying on rating tables which are less accurate.
So yes, we’re open for business. We can reinsure any type of flood peril – from river flooding to storm surge to inundation – on a treaty or facultative basis, pro-rata or excess coverage, for single years or multiyear. We can arrange indemnity covers, parametric coverage or dual coverage triggers.
Harvey proved once again that flooding can cause significant human misery and disruption as well as the well documented financial launches. But as an industry it’s not beyond our capabilities.
Category: Climate/natural disasters: Disaster risk, Floods/storms, Resilience
Location: Houston, TX, USA