Traditional catastrophe models have led to “substantial gaps” in flood coverage, according to respected flood risk specialist JBA Risk Management.
According to the firm, due to the highly complex nature of flood, it has historically been notoriously difficult to model because – unlike hurricane or earthquake – flood hazard varies significantly over a small scale, sometimes affecting one house while sparing a neighbouring property.
According to JBA, flood analysis requires the investigation of computationally heavy, high-resolution data, with a need to create detailed flood maps, while a probabilistic catastrophe model must then analyse this high-resolution data in a timeframe that fits with the business needs of the user:
“The resulting computational demands are huge. As a result, catastrophe models are traditionally time consuming to build and validate, which inevitably results in geographical limitations.
“This has led to substantial gaps in flood model coverage, especially in high-risk regions, and subsequently high levels of loss to the insurance industry. Without a consistent assessment of risk available worldwide, re/insurers may be unaware of their exposure to potentially significant correlated losses.”
JBA’s criticism comes as the UK has been warned that climate change is set to increase the cost of flooding by 80 percent.
Andy Bord, (pic) CEO of UK insurer of last resort Flood Re, recently called for a more all-encompassing approach to flood risk management that extends beyond more effective flood defences and into the wider built environment.
“Over the next 30 years, climate change will increase UK annual flood losses by up to 80 percent,” he told delegates at an event jointly hosted by Flood Re and Guy Carpenter. “Whilst £1.1 billion a year of flood damage is being prevented by the UK’s existing network of river barriers and coastal defences, it is not enough to just build higher defences to hold back the water.
“We need to learn to adapt. It is critical that flood considerations are prioritised when making planning decisions and developing new homes or retrofitting existing homes. Such considerations are also central for householders at high risk of flooding. By taking action now I believe we can adapt and ‘build back better’ – an approach we have been advocating for over four years. This is what must happen to ensure the built environment is more prepared for and resilient to future flooding.”