Europe Flood Risk and CAT modeling

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Europe Flood Risk and CAT modeling

• June 20 2007
• Claire Souch, PhD
• Director International Model Management

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Floods A Global Challenge

• Floods are the most frequent and most damaging
  natural hazard
• Approximately one third of all natural
  catastrophes
• More than half of all natural catastrophe
  fatalities
• One third of the overall economic loss
• Between 50 and a few of insured losses
  depending on penetration rates, funds, pools e.g.
  NFIP, Norwegian Pool

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European Flood Risk - widespread
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Storm Surge Risk

• North Sea risk well known from 1953 event
• Lesser recognized risk to other UK coasts, eg
  Bristol Channel

Maximum surge heights (m) for the 1953 North Sea
surge event
Insured loss from repeat of 1607 Bristol channel
storm surge
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Insurance Penetration Lower Than for Windstorm

• Flood coverage/penetration varies between
  countries
• Windstorm coverage/penetration gt90

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Flood vs. Wind Damage/Losses

• Damage/loss to individual buildings higher than
  for wind
• BUT Flood damage more localised than pan-European
  windstorms
• However large losses from simultaneous flooding
  of large rivers
• Off-floodplain flooding important contribution to
  total flood loss
• 40 winter events
• 80 thunderstorm events
• Local, frequent losses
• In the U.K., cause 30 of flood AAL

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Recent European Flood Events
Flood extent for August 2002 flood around Dresden
Demand for risk models to quantify the risk today
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Flood Trends Changing Rainfall Patterns over
Europe

• Trend in winter rainfall over Europe over last 20
  years
• Forecasts and mitigation activities bring death
  toll down
• Population and exposure growth pushing losses up

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Flood Trends Changes in Exposure

• U.K., 3 million new homes expected to be built by
  2016
• Many will be on floodplains
• Even without climate change, losses will increase
  in the future
• Who will pay ??

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Flood Trends Future Climate Risk Horizon

• condition probabilistic models with output from
  climate models
• Study on Climate Change and future flood loss
  costs for ABI (Oct 2006)

2006
0.4m sea level rise
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Insurance Needs
Pricing, Aggregates, and Capital Allocation

• High Resolution (postcode level is insufficient)
  for underwriting and pricing
• On- and Off-Floodplain Modelling
• Aggregates and Portfolio-Management
• Continent-wide Risk Platform (global
  risk-platform)
• Expected Average Annual Loss and RP loss for the
  next year
• Complete financial perspectives/structures

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The Story So Far

• Rainfall runoff modelling across Europe
  captures correlation and takes climate change
  into account

Extended coverage over next 3 years