How U.S. inland flood became a “peak” peril

This article by Jeff Waters, meteorologist and product manager at RMS, first appeared in Carrier Management.

As the journey towards a private flood insurance market progresses, (re)insurers can learn a lot from the recent U.S. flood events to help develop profitable flood risk management strategies.

Flood is the most pervasive and frequent peril in the U.S. Yet, despite having the world’s highest non-life premium volume and one of the highest insurance penetration rates, a significant protection gap still exists in the U.S. for this peril.

It is well-known that U.S. flood risk is primarily driven by tropical cyclone-related events, with storm surge being the main cause. In the last decade alone, flooding from tropical cyclones have caused more than $40 billion (2015 USD) in insured losses and contributed to today’s massive $23 billion National Flood Insurance Program (NFIP) deficit: 13 out of the top 15 flood events, determined by total NFIP payouts, were related to storm surge-driven coastal flooding from tropical cyclones.

Inland flooding, however, should not be overlooked. It too can contribute to a material portion of overall U.S. flood risk, as seen recently in the Southern Gulf, South Carolina, and in West Virginia, two areas impacted by major loss-causing events. These catastrophes caused billions in economic and insured losses while demonstrating the widespread impact caused by precipitation-driven fluvial (riverine) or pluvial (surface water) flooding. It is these types of flooding events that should be accounted for and well understood by (re)insurers looking to enter the private flood insurance market.

It hasn’t just rained; it has poured

In the past 15 months the U.S. has suffered several record-breaking or significant rainfall-induced inland flood events ….

To read the article in full, please click here.

Meteorologist and Manager, Model Product Strategy, RMS
Jeff Waters is a meteorologist who specializes in tropical meteorology, climatology, and general atmospheric science. At RMS, Jeff is responsible for guiding the insurance market’s understanding and usage of RMS models including the North American hurricane, severe convective storm, earthquake, winter storm, and terrorism models. In his role he assists the development of RMS model release communications and strategies, and regularly interacts with rating agencies and regulators around RMS model releases, updates, and general model best practices. Jeff is a member of the American Meteorological Society, the International Society of Catastrophe Managers, and the U.S. Reinsurance Under 40s Group, and has co-authored articles for the Journal of Climate. Jeff holds a BS in geography and meteorology from Ohio University and an MS in meteorology from Penn State University. His academic achievements have been recognized by the National Oceanic and Atmospheric Administration (NOAA) and the American Meteorological Society.

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