Flooding is the most pervasive and damaging climate risk through most of the world, posing an ever-increasing threat. Closing the protection gap between insured losses and economic losses has continued to be a challenge, with only 17% of global economic losses being insured between 2007 and 2021.
Here is a roundup of selected recent flood risk insights from guycarp.com.
Pre-event Versus Post-event
A major consideration in mitigating public sector risk connected with flood loss or any natural catastrophe involves effective preparation for disasters before they occur. In an article published as part of the World Economic Fund Annual Meeting, Julian Enoizi, Global Head of Public Sector, points out how every dollar spent on risk reduction can save between 6 and 13 dollars in potential damages. Despite this, 88% of disaster management funds from humanitarian, development and government sources continue to be allocated to post-event response.
Leading the Way to Resilience
Torrent Technologies, a Marsh affiliate, discusses many issues connected with flood insurance in its 2022 State of Flood Report: Ready to Lead the Way to Resilience. A major consideration is the need to reduce coverage gaps when it comes to recovering from flood damage. Guy Carpenter and Marsh are both businesses of Marsh McLennan.
“Whole of Society” approach
Acting to address various disasters across the world requires not just a “whole-of-government” response in sovereign states but a “whole-of-society” response. As Julian Enoizi indicates in this video interview, governments and the insurance industry have complementary roles to play in encouraging adequate coverage.
Marsh McLennan Enhances Flood Risk Tool
The Marsh McLennan Flood Risk Index leverages research from international organizations and academic institutions to provide a global overview of flood risk and its implications on human and economic systems. Guy Carpenter is a business of Marsh McLennan.
Marsh McLennan Report on Flood Advocates Community Based Catastrophe Insurance
The report from Marsh McLennan, Staying Above Water: A Systemic Response to Rising Flood Risk, describes multiple approaches toward flood management, including the use of community-based catastrophe insurance (CBCI) to help reduce the protection gap in underserved areas. Guy Carpenter is a business of Marsh McLennan.
Center for NYC Neighborhoods Initiative
Guy Carpenter has been among the leaders in piloting risk transfer models that harness the administrative and diversification benefits of group reinsurance programs to expand flood coverage.
For example, recently the National Science Foundation and the Environmental Defense Fund, in partnership with the NYC Mayor’s Office of Climate & Environmental Justice, supported the Center for NYC Neighborhoods’ pilot program that will provide up to USD 1.1 million in emergency funding to low- and moderate-income neighborhoods in need after a major flooding event.
With Guy Carpenter’s assistance, CNYCN purchased a parametric flood cover that mirrors a flood insurance policy to finance emergency grants to households in need in the aftermath of a flood. More information about the parametric solution is included here.
Another valuable tool to help close the protection gap—and therefore the burden on governments and taxpayers after a natural catastrophe event takes place—involves parametric covers. This type of insurance pays out when certain predetermined conditions (or parameters), which strongly correlate with losses, are met. Not only do parametric solutions provide an important complement to traditional property-casualty insurance, they also help public agencies clearly determine the scenarios for which they need protection.
Risk Selection and Modeling
GC AdvantagePoint®, the industry's most advanced spatial analytics platform for event response, underwriting and portfolio management. This suite of tools helps clients translate vast amounts of data into insights to help better understand their catastrophe exposure, improve underwriting profitability, and manage claims and losses from natural and man-made catastrophe events.
Robust, multiple model applications, along with customization, help build an enhanced view of risk. Guy Carpenter, one of the industry’s largest users of commercial models, actively supplements and improves the analytic approach a client utilizes internally, through such packages as the GCAT India Flood Model and the Singapore Cloudburst Flood Model.