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29 May 18 14:26

The upcoming hurricane season, which begins on June 1,  will be another big test of our ability to create a more resilient world. Forecasters expect an average to above average season for the number of named storms and intensity.[1] Each hurricane carries the potential to do more than wind damage, and that poses a challenge. Predicting a storm’s path is fairly straightforward, but modeling where the water will go and what it will do is another matter.

My colleague Monica Ningen, our chief property underwriter for the US and Canada, says that of all the perils, “flooding is arguably the most vexing ... it’s invasive, aggressive and unpredictable.”[2]

Insurers have traditionally taken a “hands off” approach to flood. We weren’t confident in the flood maps because they did an inadequate job of showing us what we were trying to insure. 

Josh Woodbury of Swiss Re’s cat modeling team put it this way: “The difficulty in understanding flood risk is due to its high resolution, localized nature. More than hurricane or earthquake risk, flood risk can change from one house to the next, or even within a few feet.”[3]

But that’s all changed dramatically, thanks to more sophisticated modeling. We have a greatly improved understanding of the physics, high-resolution data and more powerful computing resources that allow us to price the risk more confidently, says Woodbury.

So why the about face? And why are we so interested in flood anyway? Because it’s a huge problem in this country. On average, economic losses from flooding outpace what’s insured by about $10 billion. That’s a protection gap we need to close if we’re going to create a more resilient society. 

Swiss Re is working with insurers to design and develop affordable flood coverage for consumers. We also support industry efforts to educate people who assume their homeowners insurance covers flood (it doesn’t) or the federal government will compensate them for their full loss (it won’t). 

Another misconception is “it won’t happen to me.” In fact, flooding may be coming to your neighborhood; as more development occurs in hurricane-prone areas, the greater the risk of flooding.

The insurance industry is overcoming these objections with some very valid arguments.  For a few dollars a day you can rebuild after the flood, rather than lose your home or take out a loan – if you can get one.

And here’s another compelling argument for private market flood insurance: When the private market takes more of the risk it eases the burden on local, state and federal government budgets that are already stretched.

Our recent sigma report raised the possibility of hurricane clusters like we experienced with Harvey, Irma and Maria. It’s possible we could experience another season of multiple Category 4 and 5 hurricanes in the coming years – each one packing heavy rains and storm surge.

Private insurance markets now have the tools, expertise and capacity to underwrite flood risk. Check out Swiss Re’s capabilities. Let’s not wait until the next hurricane cluster.




[1] http://www.artemis.bm/blog/2018/04/24/2018-hurricane-season-forecast-to-be-average-by-weather-company/
[2] Flooding and the Higher Ground, Monica Ningen, Swiss Re Open Minds, April 17, 2017, https://openminds.swissre.com/stories/1207/
[3] Technology Has Opened the Door for the Private Insurance Market, Joshua Woodbury, Pulse, Pennsylvania Association of Mutual Insurance Companies, Spring 2018


Category: Climate/natural disasters: Climate change, Disaster risk, Floods/storms, Resilience

Location: Armonk, NY, USA


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