MITCH IV

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• MITCH IV
• European Flood Modelling
• 6th March 2003
• Richard Sanders

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Willis

• A leading global insurance broker
• Company originated in 1823
• developing and delivering professional consulting
  and actuarial services
• clients include corporations, public entities
  and institutions
• 300 offices in 80 countries
• Clients in 180 countries
• 13,000 staff

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Historical flood losses in Europe
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The most costly insurance losses in Europe
Swiss Re Sigma No.1, 1999
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Climate change
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Flood loss records in Europe (1950 -1998)
Frequency
1950s
1960s
1970s
1980s
1990s
Severity (EURO m)
1950s
1960s
1970s
1980s
1990s
Munich Re, 1998
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Flood exposure

• Flood hazard is intensifying
• Land movement
• Land use changes
• Sea-level rise
• Changing rainfall regimes

• Exposure of insurers to
• flood is increasing
• Development on flood prone land
• Growing insurance market
• Increase in property values

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Economic looses from 2002 European floods 1
on 25th September, Reuters reported a loss
estimate of EUR15bn, this was superceded by the
loss reported above, but was again reported in
the Evandale Insurance News, February 19, 2003
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Economic looses from 2002 European floods 2
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Economic looses from 2002 European floods 3
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Economic looses from 2002 European floods 4
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European Flood Insurance
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Flood insurance in Europe
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Property insurance in Europe
Source CEA 2001
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Insurance situation in affected countries
Germany Private insurance only is available, some
from national companies, some from state
(regional) based companies. Penetration in
Germany as a whole, approx. 3 of policies
include flood as a specific hazard, part of
natural perils. Coverage is usually not
available in flood prone areas (except in
Baden-Württemberg). Coverage is for riverine
flood, not storm surge. In former Eastern
Germany, most policies have no exclusions and
therefore include flood by default.
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Czech Republic
Insurance situation in affected countries
Czech Republic Private insurance only is
available Penetration around 40 of domestic
property has insurance (increasing), flood cover
is available as an extended cover
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Insurance situation in UK
Insurance situation in UK
UK Private insurance only is available Penetration
around 80 of domestic property has insurance
(increasing), flood cover is an integral part of
this. All flood is covered, including natural
events (river, coastal, pluvial, run-off) and
man-made (domestic, drainage) Coverage is
normally available to all, although some high
risk property is subject to raised premiums and
some policy alterations. Situation currently
subject to review.
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Potential for flood insurance in Europe
Current situation varies greatly by
country Governments are frequently partly or
completely financially responsible for flood
relief. Governments are not usually comfortable
with this. In EC this may have negative effects
on their national budget deficit. Potential for
private insurance to extend is under discussion,
(see Swiss Re 2002) EC intervention is under
discussion (EC emergency funds and EIB
loans) German insurance industry in discussion
with Government regarding compulsory insurance
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Situation in Germany
2002 floods, insurers discover exposure to
former GDR where flood was not excluded from
policies Initial reaction was to exclude cover
from new policies and renewals, this was later
reversed. Market leader has 70 of policies
covering flood in former GDR covered for flood,
but only 8 covered in former FRG. German
insurance industry currently in discussion with
Government regarding compulsory flood
insurance Source Financial Times Germany
17.02.03
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New situation in Germany, Feb 2003
GDV (General association of German Insurance
economy). GDV have a flood model for Germany
ZÜRS Risk bands less than 10 years, 10 to 50
years, greater than 50 years. Using summer 2002
losses to further refine model. New models being
developed by leading insurance company, including
rainfall events and dykes. Source Financial
Times Germany 17.02.03
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Flood modelling for insurance purposes
Why is it needed? Requirements of insurance flood
models are twofold, insurance rating and
reinsurance portfolio analysis Rating needs
property level location and hazard risk for
various return periods for each insured property,
i.e. annual average loss. Reinsurance needs less
detailed property location and hazard risk from
historical or hypothetical events These
specifications and requirements are different
from those of other interested parties, e.g.
engineers, emergency planners, government,
etc. Quoting EA 2002
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Flood modelling for insurance purposes
Who does it benefit? Property owners, insurers
and reinsurers. Insurance companies use flood
models to more accurately calculate premiums
based on risk. Higher level of detail should
lead to less properties classified as at-risk,
will remove some uncertainty and allow insurers
to offer insurance to more property owners. Will
help insurers to consider offering insurance in
geographic regions not previously covered. Will
allow reinsurers to balance their portfolios and
to better understand the risk produced by flood
insurance. Hopefully to provide reinsurance
thereby enabling the establishment of insurance.
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Data and information requirement for flood
insurance modelling
Insurance information Numbers of policies, sums
insured, policy conditions. Property information
Age, construction type, construction materials,
occupancy, floor height, mitigation
measures Location x,y coordinates, full address,
postcode, street number and name Flood
information flood depth areas or grids for
various return periods Elevation data Bare earth
dtm at accuracy and resolution to suit location