Flood Re, the UK’s government-backed reinsurance scheme, has partnered with researchers at Lighthill Risk Network, as well as a number of re/insurers and brokers, to produce a collaborative report on ways to improve flood risk understanding and management.
The research project compiles input from Swiss Re, SCOR, Allianz, Aspen, Lloyds TSB, Direct Line, Willis Re and Guy Carpenter to identify challenges and priorities for flood risk modelling.
The highest-ranked research priority was vulnerability curves, as re/insurers felt that current damage ratios oversimplified the reality of damage distributions.
This was followed by the correlation of rainfall/flood and windstorm hazards, with re/insurers stating they would like to assess the contribution of flood losses to wind events and vice versa.
Flood Re and Lighthill noted that flood risk is a particularly challenging peril to model given that losses are becoming exacerbated due to complex factors such as urbanisation, more buildings in exposed areas, failed land-use practices, and climate change.
“Our in-house experts, together with the team at The Lighthill Risk Network, have identified the key challenges that the reinsurance industry is facing with modelling flood risk,” said Gary McInally, Chief Actuary of Flood Re.
“Flood risk modelling and the production and use of related underwriting tools, is challenging but essential for insurer understanding of risk and appropriate pricing of policies,” he explained.
“We hope that this report will inform and encourage further research into how flood risk modelling can be improved, which will help us and the wider industry to better understand flooding and support more people living in flood prone areas.”
Dickie Whitaker, Chief Executive at Lighthill, also commented: “We are delighted to support this pioneering and collaborative initiative to prioritise and improve the (re)insurance industry’s understanding of and modelling for flood risk and its collaboration with academia.”
Compared to other sectors, (re)insurance has not been prominent on academic research spending,” he continued. “One of the roles of the Lighthill Risk Network in this initiative is to improve the linkages between academia and the (re)insurance Industry – aggregating large companies to help fund research and bridge this gap.”
“We want to draw knowledge and innovation from academia into insurance and help improve flood model methodologies and development, as well as support end-user validation of flood models, and help improve accuracy of results through improved input data,” Whitaker added.
“Collaborating with key reinsurers and government insurance initiative Flood Re is critical to the success of this research project, which could have a global impact and transform the way we understand and manage flood risks, helping us better mitigate these risks and model for them.”