EUROPEAN FLOODING
Floods: how to use next-generation data to predict future inundations
The flooding in Europe this summer underscored the fact that disasters are rarely contained within one nation. But how can the data be collected to properly assess the risk? A Re/insurance Lounge panel discussed the issues.
There is a general understanding that problems around the globe can be solved only by global solutions. To get there requires shared knowledge, shared skills, and often a shared aim.
Recent floods in Europe have prompted a sharper focus in this area. While largely thought to have taken place in only one country, continued flooding affected towns and other settlements across much of Europe during the northern summer.
As of July 20, eight days after the floods hit Germany, the publication Science estimated that alongside the then-death toll of 165, 31 other people had died in Belgium. Floods were also reported in France, Italy, and Luxembourg, among others, during the summer.
To talk about the disaster and the work done by the insurance industry in this area, the Re/insurance Lounge, Intelligent Insurer’s on-demand platform for interviews and panel discussions with industry leaders, hosted a four-person panel discussion on the subject.
Taking part in Intelligent Insurer’s discussion were Daniel Stander, special adviser to the United Nations; Christian Badorff, senior analyst at Moody’s; Andrew Bart, president for loss adjusting international at Crawford; and Charles Blanchet, vice-president of solutions at ICEYE.
Government involvement
All speakers had been shaken by the floods, but acknowledged that with climate change that such events will increasingly occur. This will, in turn, have industry implications, they agreed.
“What needs to be answered at some point is how governments want to continue with this type of risk,” said Badorff.
“Just recently, the German government said that it will pay out €30 billion ($35 billion) or is prepared to pay out €30 billion, to cover economic losses associated with the floods. That will also, for people that do not carry out any insurance against this type of event, pay out 80 percent of the claim, or even 100 percent in some instances.”
There is already an uneasy relationship between the limits of what an insurer can do and the willingness of a government to step in, he added. This is tempered by variations in national laws and customs, often between neighbouring nations.
“There is already an uneasy relationship between the limits of what an insurer can do and the willingness of a government to step in.”
Christian Badorff, Moody’s
“In Germany,” he said by way of example, “you don’t have compulsory insurance against this specific type of risk—flooding—so fewer than 50 percent carry protection against that. In the Netherlands, I think it’s compulsory but when you go beyond a certain level in terms of claims, then the government would declare this a natural catastrophe, and step in.
“In Belgium, you don’t have compulsory insurance, a local government would also step in at some point, basically to bear the brunt if it’s not available any more to the insurance industry.”
The panel also spoke about how difficult it was, even in a developed western country such as Germany, to obtain real-time accurate data after a major disaster. It is a difficulty, Stander said, that becomes increasingly tricky in developing nations. And as these countries continue to develop, the ability to insure will become paramount.
Bart agreed, saying: “If you want to have sustainable development, sustainability is not just around environmental sustainability, it’s around economic sustainability. And you cannot have that without the ability to preserve capital.”
Pooling data
Stander said that there has been some interesting work done in this area, particularly in the Philippines where he has been working on a scheme to pool data.
“It’s maybe not so well known,” said Stander, “but there is a scheme called the Philippines City Disaster Insurance Pool, or PCDIP, that I was lucky enough to work on with the Asian Development Bank a couple of years ago.
“PCDIP is interesting because it’s sponsored by the finance minister at a national level. It essentially empowers cities—10 cities, I think, in the first instance, which will go to 20—to put a pool in place among themselves.
“As a country, it’s very diverse: some cities are more exposed to earthquakes, some to water, typhoon wind, or typhoon flooding. The idea is to pool the risk and diversify it among these 10 cities and have a reinsurance function on the back of that. That’s been led by the national government to relieve its own burden.”
Stander compared the situation to that of the US. When a disaster strikes there, it often falls on the individual state to request help from the federal government. The idea in the Philippines, said Stander, is to help the cities to help themselves and each other.
“It’s quite forward-thinking of a national government to say: ‘You know what, cities? We would like you to work together to better understand your risk individually, and collectively, then pool it and put an insurance or reinsurance solution in place as a backstop’,” he explained.
Blanchet said that ICEYE had been working on developing data models with a number of international bodies and organisation, including the United Nations and the World Bank, alongside insurers, reinsurers, and affected governments.
“We need to come together and make some investments to get high-quality digital elevation models and building footprints, along with a couple of other datasets,” he said.
“This will allow us to provide the same level of granularity and quality of data to a developing nation as we are to developed nations.”
To view the full Re/insurance Lounge session click here
Images, from top: Shutterstock / cinan, Ben Heine
