Opta says model lets insurers ‘quickly identify properties more at risk of flooding’

SCM Insurance Services announced Wednesday that its Opta Information Intelligence unit has a partnership with Impact Forecasting LLC to provide flood model products to Canadian insurance providers.

“Opta will leverage this technology to provide its customers with the ability to quickly identify properties more at risk of flooding at any geo-coded address across Canada,” SCM stated in a press release.

In May, 2015, Impact Forecasting said its flood model for Canada “covers a geographical area representing 98% of the Canadian population.” Impact Forecasting is owned by London-based Aon plc.

The flood model from Impact Forecasting’s partnership with Opta will “help insurers better underwrite and manage their riverine and off-flood plain exposures,” SCM stated.

“The partnership will help provide carriers with immediate real-time flood hazard assessment, at time of quote or new business, through iClarify”, Opta chief data scientist Greg Gilbert stated in the release.

Property data in Opta iClarify includes construction features, satellite imagery, claims, inspections and permits.

When Impact Forecasting announced its model in 2015, Aon Benfield (Aon’s reinsurance intermediary) said the model had a “combined hazard resolution of 10 metres for the most exposed areas and 30 metres for remaining parts of Canada.”

The model “incorporates essential Canadian hazard content including local sources of spatial (GeoBase government initiative) and hydrological (Environment Canada and Le Centre d’expertise hydrique du Québec) data,” Aon Benfield said at the time.

Overland flood coverage was generally unavailable in Canada until 2015, when The Co-operators Group Ltd. launched its Comprehensive Water Endorsement in Alberta and Aviva Canada Inc. launched its overland water endorsement in Alberta and Ontario. Then in November, 2015, RSA Canada started offering its Waterproof coverage for new business and last month, Gore Mutual announced WaterEscape Plus, an endorsement available for some Ontario residential policies with sewer backup coverage.

Intact Insurance plans to launch a “revised property product,” with more water coverage, in 2016, Intact president Jean-Francois Blais said in October, 2015 during the CEO panel at the Insurance Brokers Association of Ontario (IBAO)’s annual convention in Toronto.

Insurance Bureau of Canada has flood maps, which let professionals “assess flood risk right down to the residential level for both fluvial and pluvial flooding,” Craig Stewart, IBC’s vice president of federal affairs, said last during a panel discussion in Toronto at the Canadian Catastrophe Conference.

“It’s available to insurance companies now so that they can underwrite risk,” Stewart said during the conference, produced by Catastrophe Indices and Quantification Inc. (CatIQ), a sister company to MSA Research Inc. Stewart was referring to a project led by RELX Group plc’s LexisNexis Risk Solutions unit.

“Essentially what it does is the company took river gauge and rainfall data to measure flood extent and depth, flood defence information, historical flood records, snowmelt and terrain data,” Stewart said at the time. “Then we partnered with LexisNexis, DMTI Spatial and Brookfield to incorporate address data, residential replacements costs and peril information.”

In Canada, there is a “growing appetite” to take on the risk of covering overland flood, IBC president and chief executive officer Don Forgeron said in October, 2015 at the National Insurance Conference of Canada, held in Montreal by MSA Research.

“However these new products in the market will likely not deal with all of the high-risk properties and for that we believe we need government involvement.”

This government involvement, Forgeron said at the time, “should be focussed on pre-planning instead of after the fact financial support.”

With Comprehensive Water, The Co-operators covers damage arising from a river body overflowing its banks, water that overwhelms the natural or built in infrastructure’s ability to carry it away and traditional sewer backup,” the carrier’s executive vice president and chief operating officer for property and casualty operations, Rob Wesseling, told Canadian Underwriter earlier.

Aviva’s overland flood endorsement covers “losses that result from the accumulation or run off of surface waters, including torrential rainfall when water enters the property,” as well as “sudden accidental inundation of water that comes in over land, whether it’s by a river breaking its banks or whether it’s from a lot of rain happening over a short period of time,” Maz Moini, Aviva Canada’s vice president of commercial lines and reinsurance, told Canadian Underwriter earlier.

RSA covers “fresh water flooding and damage that is also caused by eaves and downspouts and drains,” the carrier’s senior vice president for personal lines, Donna Ince, told Canadian Underwriter when RSA announced the product.

Gore Mutual’s coverage is for fresh water flood damage resulting from the accumulation of surface water, including rainfall that enters the property.

Coastal flooding is not covered by Aviva or RSA, while The Co-operators does not cover waves, tidal water, tidal waves or tsunamis.

At NICC last October, Forgeron said “there is no single correct answer, and certainly no flood insurance model elsewhere in the world that can serve as an off-the shelf solution for us here in Canada.”

He made his comments during a panel discussion titled Flood Insurance Programs – Trials, Tribulations and Success Stories. At the time, NICC attendees heard from Brendan McCafferty chief executive officer of Flood Re, Britain’s not-for-profit monoline reinsurer scheduled to launch in April. McCafferty told NICC attendees that Flood Re will “operationalize a cross subsidy from 98% of the population to 2% or so of the population,” and “relies on a levy of 180 million pounds per year every year” that the British government imposed through legislation on the industry.

In the United States, the National Flood Insurance Program (NFIP) provides coverage for eligible properties under certain conditions. A property cannot qualify for NFIP coverage unless it is in a community that has joined the NFIP and agrees to enforce certain floodplain management standards.

In some cases, NFIP premiums are subsidized. The Biggert-Waters Flood Insurance Reform Act, which passed in 2012, would have phased out “almost all discounted insurance premiums,” reports the U.S. Government Accountability Office (GAO) an independent agency that reports to Congress.

But in March, 2014, the Homeowner Flood Insurance Affordability Act was passed. This “reinstated certain premium subsidies and slowed down certain premium rate increases that had been included in the Biggert-Waters Act,” GAO noted.

In an earlier report, Marsh & McLennan Companies Inc. reported that NFIP “was primarily self-funded” from 1968 through 2005, when hurricanes Katrina, Rita and Wilma hit, resulting in US$19 billion in debt for NFIP. In 2012, Hurricane Sandy created another US$7 billion in debt for NFIP, Marsh & McLennan, titled Reforming the National Flood Insurance Program.