Globally, the damage to the insurance market and the reimbursement of floods has increased, doubling in ten years to reach US $ 80 billion in the period from 2011 to 2020, then another chase in 2021 when it reached only $ 20 billion.
This is according to the global insurance giant Swiss Re in the latest financial report, in which the company looks at the impact of flood insurance on the world.
Economic growth, population growth and rapid urbanization around the world are the main causes of flood damage, Swiss Re explained.
But over the past decade, rainfall and climate change have been the biggest contributors to losses, according to the reinsurance company.
Although insured losses from floods worldwide have reached a new high, nearly $100 billion since 2011, there is still a huge gap in flood protection.
In fact, Swiss Re’s analysis shows that only 18% of floods are insured during that period, which leads to economic losses due to extreme floods.
The situation is improving, as insurance and insurance companies, with the help of data analytics and modeling companies, are getting better at flood risk protection.
“Even though floods were considered unlikely, better data, more risk maps and models that include risk and vulnerability have led to more accurate pricing of flood risk, which has led to a flood of insurance companies,” says Swiss Re. . in his report.
Flooding problems are likely to continue, especially when you consider how many people are at risk of flooding.
In the United States, 40% of the US population lives in coastal areas and 10% lives in coastal areas, Swiss Re says, “Although flooding is occurring in residential areas and land closures are caused by of urbanization and rising temperatures. , home flood insurance rates are only 4 percent lower.”
The insurance market’s interest in flood risk is growing, as is the interest in the reinsurance market and we are now seeing dedicated flood risk management agencies, such as FEMA.
Therefore, the risk capital is decreasing, when it comes to flood impact, which means that there is a possibility that the penetration of flood insurance will increase and the coverage of private coverage will exist in the long run.
But there is a huge gap in flood protection to be met and recent events in Pakistan drive the need for flood insurance in an economy that seems to be growing again.
The economic impact of floods is often greater than the economic impact, so the insurance, reinsurance and insurance-linked securities (ILS) market also has an important role to play in creating solutions, perhaps parametric in nature, that can provide greater risk. unfortunately. security in the developing world.
The learning gap is also more evident in the United States, where the government subsidized insurance under the NFIP continues to take a lot of money from floods, or houses remain uninsured due to floods.
“The recent events in Kentucky, Mississippi and Texas are a sad reminder of how devastating floods can be to our lives,” Keith Wolfe, President of US P&C, Swiss Re commented on the US situation.
“Although the flood insurance market has grown significantly over the past few years, many people are not covered due to flooding and many of those affected by these events are uninsured, leaving them to collect their money.”
“Incentives for insurance companies to protect more families in the US are twofold. First, and most importantly, insurance companies can greatly help communities recover after a disaster. In addition, this business can now be written with greater confidence than before because of its excellent performance. “
“Flood risk is in more places than your mortgage company tells you. Every insurance agent needs to understand what’s out there in the commercial market to provide more options to our underinsured community.
Summarizing what is needed to insure global flood risk, Swiss Re explained, “Given the magnitude of the potential damage, a strong risk assessment linked to high-quality information and high-quality assurance is essential for the development of flood insurance. A financial contribution to the response it’s a disaster.”