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Thought for the day… recent floods are exposing protection gaps
Throughout July, floods have affected areas across the world. With the release of loss estimates from various modellers, brokers, insurers and other commentators, the size and range of the relative gap between economic loss and insured loss is notable, as well as different loss drivers. In the Henan province floods, in China, the majority of claims have been from motor due to a lack of property flood insurance. On InsTech London podcast episode 136, Matt Reid from JBA discussed the large flood protection gap in the US. To help close the gap, higher quality models and data are needed, which in turn can help spawn new insurance products. We will be looking closely to see which new offerings are emerging from new and established companies.
Early loss estimates of $6 billion for the floods that hit western Europe in mid-July are standing up well now that insurers and modellers have had a chance to assess the loss. According to McKenzie Intelligence Services, almost two months’ worth of precipitation occurred within 48 hours. We covered some of the early estimates of loss from our member companies and others in this article released last week.
Mick Noland explained in last week’s podcast how insurers are using real estate data and the unique data sets that CoreLogic is offering. He told us specifically about the work that CoreLogic is doing to provide an automated solution for flood ratings specifically for FEMA. Listen or read here.
Usually we are a bit skeptical about reports of large numbers with an implied high degree of accuracy when discussing catastrophic loss. In this case we’ve made an exception. Having spoken to ICEYE we know that their own satellites, capable of delivering high resolution images, were able to travel over Europe after the storms and identified every one of those 71,859 buildings impacted by the flooding that began on July 12. Over 10,000 buildings were impacted by flood waters at a depth of water sufficient to result in significant damage.
Flash flooding throughout July caused underground stations to close, basements to flood and drivers to abandon their cars. Flood forecaster and corporate member Previsico revealed that some areas received a month’s worth of rain in one day. Previsico offers continuous real-time monitoring, down to street level, which is essential for flood warnings that are early enough and explicit enough to enable people to take preventative action.
In parts of Henan province, a year’s worth of rain fell in three days. Most insurance claims are expected to be in auto lines of business. Ping An for example, the largest Chinese insurer, has reported that over 90% of the claims it has received are auto related. Goldman Sachs estimates auto insurance claims of up to $1.7 billion.
The delayed monsoon has caused floods and landslides leading to over 200 deaths in Maharashtra. Deaths and injuries have been caused by building collapses. Successful evacuations of over 3 million people have occurred.
Flooding is one of the main physical hazards that is projected to increase in frequency and severity as a result of climate change. Nasdaq asked Andrew Smith, Chief Operations Officer at Fathom, about the Bank of England stress tests and how the company has updated its flood models.
This new insurance product is designed to provide flexible coverage for low and moderate flood risks. It uses Swiss Re’s proprietary flood modeling tool for rating purposes and aims to make it easier for insurers to enter the US private flood insurance market.
FloodMapp, the Australia-based flood mapping technology provider founded in 2011, has introduced NowCast. The tool provides real-time flood forecasting and data feed mapping. FloodMapp has partnered with the GIS software provider Esri Australia to deliver the product.
The MGA focused on US commercial flood, founded by Cory Isaacson, Jim Rice (both ex RMS) and Nick Lamparelli (ex QBE) in 2017 has announced a $15.5 million Series A investment round led by Telstra Venture. The company currently focuses on writing flood coverage for complex mid-tier commercial risks and high net worth properties.
According to Aviva, 19% of British properties are at risk of surface water floods. Its research also shows that only 9% of people feel fully prepared for flooding in their home, yet 57% thought climate change would impact their homes in the next 10 years.
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