Insured flood losses doubled to $80 billion during 2011-20 compared to the previous decade, and global flood losses reached $20 billion alone in 2021, Swiss Re reports.
“Increased wealth, larger populations and urbanization have raised flood risk exposures across the world,” reads Swiss Re’s latest Economic Insights report. “In addition, an effect of climate change is increasing likelihood of high-intensity, heavy rain and short-duration floods events associated with tropical cyclones.”
Despite insured loss numbers being as high as they are, insurance penetration remains low globally, Swiss Re finds. Eighty-two per cent of global economic losses from flood events between 2011-21 were uninsured. Global economic flood losses reached $99 billion during the same period.
Once considered uninsurable, overland flooding is now covered largely due to the nature of the risk, which requires precise modelling of the exact location of a property, Swiss Re notes. “Today better data and sophisticated risk mapping and modeling are enabling more accurate quantification of flood risk, creating scope for growth of the private sector flood insurance market.”
But there is still a gap in protection, Swiss Re finds. To close this gap, the industry needs to invest in more modelling and risk awareness-raising initiatives.
“Other countries provide examples of possible alternative market structures. Many advanced markets have public-private partnership initiatives, for example the UK’s Flood Re scheme,” the report reads.
This news comes after the national flood insurance task force this week published its report with findings on a possible national flood insurance program in Canada.
Insurers need to raise risk awareness among consumers and distribution partners — including brokers and real estate brokers, Swiss Re suggests.
“Given the scale of loss potential, robust risk assessment anchored to high-quality and high-resolution data is key to flood insurance expansion as a complement to disaster-resilience investment,” says Swiss Re. “Despite progress made in developing rigorous and robust flood models, accuracy for flood risk remains limited due to the need for high-resolution location data pertaining to specific properties.”