Report: All-Encompassing View Can Help Mitigate Flood Risk

Floods cause more than just property damage. Climate change, growing concentrations of infrastructure and business activity in flood-prone areas, and the increasing connectivity of global supply chains are making flood risk harder to identify and manage. It is to the advantage of businesses to develop operational resilience and identify sources of risk and hidden vulnerabilities in their value chains from suppliers and customers.

For example, in the UK, three out of four businesses do not have a business continuity plan for floods. The US has over a quarter of its critical infrastructure at risk of flooding. Firms in coastal areas are particularly susceptible to hurricane-induced storm surges and extreme rainfall. Flooding has affected more than 350 cities in China in the past 10 years, leaving global industry value chains vulnerable. Large-scale flooding in Thailand and Vietnam has disrupted global supply chains in the electronics industry multiple times.

Marsh McLennan’s Preparing for a Wetter World report encourages businesses to take a holistic, 360-degree view of managing flood risk. Given its complexity, more-granular tools could be required to assess how the threats can propagate through different channels. Flood models, for example, can provide critical insight into present-day and future levels of physical risk under multiple climate change scenarios at higher geographical resolutions, helping to inform risk transfer strategies and support capital expenditure, asset siting and long-term investment decisions.

Guy Carpenter supports clients with catastrophe modeling and model validation (sensitivity testing, scientific appraisals, loss validation). We help tailor traditional reinsurance and alternative capital solutions (parametric insurance, catastrophe bonds, risk pools, community-based catastrophe insurance) that provide cover against the risk of flood damage.