A new white paper from Gallagher Re has highlighted how rainfall-driven flooding is increasingly causing losses in smaller communities and catchments beyond traditional flood zones, underscoring the need for insurers to look beyond established hotspots to identify emerging sources of flood risk.
The findings in A Risk in Flux: Exploring Europe’s Changing Flood Reality for Insurers are based on an analysis of KatRisk’s high-resolution flood hazard and flood defence datasets, alongside Gallagher Re’s Europe Flood Model, which captures both fluvial (river-driven) and pluvial (rainfall-driven) flooding across Europe.
Dave Egan, Head of International Property Practice at Gallagher Re, commented, “For many years, the industry’s understanding of European flood risk has been shaped by experience of major river flood events.
“While those risks remain important, today’s loss landscape is increasingly being influenced by rainfall-driven flooding affecting smaller communities and catchments beyond traditional flood zones.
“As exposure continues to grow across Europe, insurers need a more forward-looking view of flood risk that goes beyond historical loss experience.
“By combining KatRisk’s advanced flood hazard science with Gallagher Re’s market expertise and understanding of flood accumulations, our Europe Flood Model helps clients better identify emerging concentrations of risk and make more informed underwriting, reinsurance and capital management decisions.”
The analysis highlighted a “growing disconnect” between where flood losses have historically occurred and where future losses may emerge. Gallagher Re said the findings could help insurers identify emerging concentrations of exposure, assess portfolio risk and make more informed underwriting, reinsurance and capital allocation decisions.
The research also found that investments in flood defences and resilience measures have helped reduce losses in many historically flood-prone urban centres. However, flood risk is becoming increasingly dispersed.
“As exposure continues to grow, insurers are facing greater loss potential from rainfall-driven flooding affecting smaller catchments, suburban developments and communities outside major river corridors,” Gallagher Re added.
The paper also underlined the growing importance of rainfall-driven flooding. Data from the German Insurance Association (GDV) show that 32 of Germany’s 37 largest flood-related insurance events since 2002 (86%) were primarily caused by heavy rainfall or flash flooding, accounting for 58% of insured flood losses.
Gallagher Re said storm Bernd in 2021 illustrates this trend. Although it mainly affected small river catchments and communities of fewer than 50,000 residents, it generated more than €10 billion in indexed insured losses, making it Germany’s costliest flood event in modern insurance history.
Against this backdrop, the report stressed the need for more sophisticated analytics to assess how hazard, exposure, vulnerability and flood defences interact across insurers’ portfolios as Europe’s flood landscape evolves.
“By incorporating detailed flood defence information and high-resolution hazard data, the Europe Flood Model provides a more comprehensive view of flood risk across the region and helps insurers identify emerging accumulations that may not be apparent from historical loss experience alone,” Gallagher Re added.
Martyn Sutton, General Manager at KatRisk, said, “Flood risk extends well beyond established hotspots. High-resolution, physically based modelling reveals how rainfall-driven flooding, smaller catchments and local flood defences can significantly influence exposure.
By bringing together KatRisk’s detailed hazard and defence data with Gallagher Re’s market expertise, this analysis gives insurers a clearer understanding of potential accumulations, helping them reassess assumptions and make more informed underwriting and portfolio decisions.”
