Tag Archives: Europe Flood

Exceedance: Time to Make Risk More Transparent

As the sun shone over the Biscayne Bay at the start of the second full day at Exceedance, our keynote guest speaker, Jeff Goodell, energy and environmental expert, investigative journalist and author of numerous books including The Water Will Come asked a provocative question in his opening slide. It simply said, “Goodbye Miami?”

Jeff said that he was at home being in the company of fellow “catastrophists” and the risk management community at Exceedance, but this is not always the case. When talking about climate change and sea-level rise, he sometimes felt as if he was Richard Dreyfuss in the movie Jaws. Dreyfuss played oceanographer Matt Hooper, a character who continually warned the Mayor of Amity Island to close the beach because of the risk of shark attacks. The Mayor ignored the advice, due to the economic impact of closing the beach … but [spoiler alert] the shark kept coming. Jeff remarked that sea-level rise is the shark, and it’s bigger and more dangerous than we first anticipated.

Jeff Goodell presenting at Exceedance

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Euro 2016: France Inundated by Fans and Floods

This week the final knockout rounds of Euro 2016 take place in France. Sadly, England has long since left the country and the tournament, largely due to some inept displays. But more miserable than England’s performance, was the weather at the start of the tournament, which caused concern in the capital as intense precipitation on top of an already saturated France, led to severe flooding.

Some areas of the country experienced the worst flooding they have seen in a century, with the floods across eastern and central France declared a natural disaster by French President François Hollande. River levels in the Seine were at their highest in nearly 35 years, impacting Paris, and leading to three of the capital’s best-known museums — the Louvre, the Grand Palais, and Orsay —closing their doors to the public, as staff moved priceless works of art to the safety of higher floors.

Source: The Guardian

There were also concerns surrounding how the flooding could impact the tournament. However, as you can see in the below image, which represents the RMS 1,000 year inland flood hazard extent, neither of the two stadia located in France’s capital (yellow markers) were really at any risk of flooding. The same can’t be said for the fan zone adjacent to the Eiffel Tower though (red marker). Continued intense rainfall, would have led to increased flood severity, meaning that 90,000 or so fans would have been in need of their waders.

Stade de France and Parc des Princes (yellow markers); Paris Fan Zone (red marker)

Paris wasn’t the only location in France to be impacted by the floods though; further south the town of Nemours observed severe flooding as the River Loing burst its banks. While devastating to the local community, this severity of flooding can be expected in the town. The RMS Europe Inland Flood maps demonstrate such flooding for events in excess of the 50 year return period, but as the below image of the 200 year flood extent demonstrates, the flooding could have been even more severe.

Rue de Paris, Nemours (yellow marker) and Château-Musée de Nemours (red marker)

The flooding in Nemours is a good example of why it is so important to understand the standard of protection offered by local flood defenses, in order to fully understand flood risk. The RMS Europe Inland Flood models and maps explicitly represent the impact of flood defenses and provide some noteworthy insights into the potential exposure at risk, if the standard of protection is not maintained or local flood defenses are overtopped.

Rue de Paris, Nemours. Source: The Guardian

If we removed all flood defenses and consider a 100 year return period level of flood hazard across France, the RMS analyses estimate that over €600 billion of insured exposure is at risk to flood damage. However, approximately 40 percent of this exposure at risk is protected against such levels of hazard by local flood defenses.

Source: Château-Musée de Nemours

And in the largest exposure concentrations, such as Paris and its surrounding area, the importance of local defenses is even more prominent. Looking at a similar 100 year return period level of flood hazard in this region, almost €60 billion of insured exposure would be at risk of flooding, but approximately 90 percent of that exposure is protected against this level of hazard.

Flood can be thought of as a polar peril; if you’re in the extent of a flood event, the costs are high but if you’re on the edge then you’re safe. And for this reason, an understanding of the impact of flood defenses is vital, because if they breach or become overtopped, the losses can be high. Knowing where exposure is protected allows you to write business smartly in higher risk zones. But understanding the hazard, should defenses fail, is also vital, enabling a more informed understanding of severe flood risk and its associated uncertainties.

This post was co-authored by Rachael Whitford and Adrian Mark.

Three Principles for Exposing the Hidden Risks (and Opportunities) Within Your European Flood Portfolio

Building a profitable European flood portfolio is like walking a tightrope—a tricky balancing act. It is of course important to minimize your risk of significant losses. But while big losses certainly haunt the market—just remember the €1.7 billion claimed in the UK as a result of last December’s floods—being too cautious or overpricing will lead you to miss out on attractive opportunities.

 Striking the right balance is no easy task. Flooding is a complex affair, with many factors to consider (such as the likelihood of three consecutive rainstorms causing major inland flooding in the UK in one month). Insurers are understandably wary. But with the right approach—which involves challenging outmoded assumptions, using high quality data, and remembering that floods spill over national borders—the balance can be struck.

The three principles outlined below should always be borne in mind when looking to grow a profitable European flood business.

1. Challenge your assumptions

It’s always difficult to go against the grain and question long-held assumptions. But as Mark Twain said, “It ain’t what you don’t know that gets you into trouble; it’s what you know that just ain’t so.”

For instance, it seems logical to focus on business well away from rivers or flood plains. But the fact is that up to 50 percent of the average annual loss from flooding across Europe is from pluvial (non-river) flooding such as groundwater and flash floods. “Safe bet” properties can easily attract flood losses, quickly turning supposedly “safe” and profitable portfolios into riskier propositions.

And avoiding rivers can also mean missing out on profitable business opportunities. The European Union invests €40 billion annually on flood defenses, mitigation, and compensation against flood events. Effective flood defenses such as these can transform an area from being flood-prone to largely flood-free.

2. Build your business on the latest detailed, comprehensive and high-quality data

So Mark Twain wasn’t completely right—what you don’t know can also get you into trouble. It’s essential to incorporate detailed, up-to-date flood defense data (covering location, structure and effectiveness) into your exposure analysis. Assessing the impact these defenses have on water flow for a specific area or property provides confidence when evaluating risk, and helps price desirable business more competitively.

That said, getting hold of this data can be an arduous task. Doing it yourself means relying on a range of local and national databases. A lot of data is old and inaccurate, and some doesn’t get published at all. European data in particular is patchy compared to that available in the US. This is why 70 percent of RMS’ data in our Europe flood map and models is proprietary—developed using in-house expertise, research, and historical event information.

But just having the data isn’t enough—you need to use that data properly. And that means modeling across a whole range of scenarios. The recent experience of Northern England—where record-breaking levels of rainfall breached newly-installed defenses—showed that when residents believe defenses have made their area largely flood-free, the resulting false sense of security can have catastrophic effects. People can prove less likely to implement contingency measures or invest in flood resiliency for their own properties. The result? Higher claim costs.

3. Floods don’t respect national borders

Did you know that more than 150 rivers in Europe cross national boundaries? In fact, flooding along the Danube affected six countries in 2013—from Germany all the way along to Serbia!

The lesson is simple: even if you only write business for a single European country, don’t rely on country-specific maps from national institutions to calculate your exposure to flood risk. This also applies when writing business in more countries—even if the data is good, without seeing the flood risk along an entire river you can’t be sure whether your portfolio is taking the lion’s share of the risk.

By thinking about the spatial correlation of flood risk across Europe you can avoid large accumulations of risk and diversify your portfolio without substantially increasing capital requirements or reinsurance costs. An accumulation of risk along a stretch of river in one country can be offset by attracting business in a lower risk area along the same river in a different country.

Balancing risk and reward to build a profitable European flood business is always a tricky affair. But these three principles provide a base from which to build a business that not only minimizes risk, but maximizes profit too.

Just How Unlucky Was Britain to Suffer Desmond, Eva, and Frank in a Single December?

Usually, it’s natural disasters occurring elsewhere in the world that make headlines in Britain, not the other way around. But you’d have to have been hiding under a rock to have missed the devastation wrought by flooding in the U.K. last month, thanks to the triple-whammy of storms Desmond, Eva, and Frank. Initial analysis from the Association of British Insurers suggests that the damage done could run to the region of £1.3bn.

But just how unlucky was the U.K.to suffer not just one, or two, but three big storms in one December, and for these three storms to interact in such a way as to produce the chaos that followed?

First it’s worth pointing out that floods in the U.K. are—as is usually the case elsewhere—subject to important seasonal variation (see chart below). The winter months bring the highest number of events, and December does in fact come out (slightly) on top, especially for flooding events of the sort seen last month, which tend to follow heavy rainfall leading to soil saturation (November 2015 received about twice the average climatological rainfall for November in the U.K.).

Source: RMS

The reason this matters is that, when soil is sodden following an extended period of heavy rains, further rains can more easily run off the surface, exacerbating the risk of pluvial flooding. The water will then follow natural and artificial drains until it reaches the closest river network, in which it can accumulate, potentially triggering river or “fluvial” flooding. The runaway effect of the masses of water can also cause what is known as ground-water flooding. This cumulative phenomenon means that—as we saw in December—flooding can persist for a significant amount of time, leading to several flood events in close succession.

A flood CAT model that properly captures these sorts of interactions between rainfall events and hydrological systems will allow not just for an assessment of the likelihood of a single severe event, but also a better understanding of the compounding factors that can lead to the sort of flooding seen in the U.K. last month. And based on our latest RMS pan-Europe flood model, the chances of having three rainstorms lead to major inland flooding over a single December are far from negligible.

Source: RMS Europe Flood Model

The chart above shows the probability of one, two, three, and four flood events for the month of December. What it means is that, on average, every second December in the U.K. has at least one flood event, and every third December has only one flood event. Around every eight years there are two flood events, and a cluster of three flood events happens once every quarter-century.

Now, this does not mean that flooding on the scale just witnessed happens on average every 25 years—just that this is the average period for seeing three flood events in one December. Even if it did, it wouldn’t mean that the U.K. can rest on its laurels until 2041… this is just a statistical average. It is quite possible for clusters to hit several years in a row—a so-called “flood-rich period”.

This gets to the real nub of the issue. The question of how often this sort of flooding takes place in the U.K. is almost by-the-by. The point is that it isn’t rare as hen’s teeth, and so the U.K. needs to be prepared. And what was most shocking about December wasn’t the flooding itself, so much as the sheer lack of resilience on display. A media storm has understandably been whipped up regarding the level of investment into flood walls and so on, but protective infrastructure is only part of the equation. What is needed is not just flood walls (which can actually be counterproductive on their own), but a wider culture of resilience. This includes things such as flood warning systems, regular evacuation drills, citizens having personal plans in place (such as being ready to move furniture to upper levels in the case of an alert) and, critically, the ability to respond and recover should the defences fail and the worst happen (which is always a possibility). The U.K. is the world’s sixth richest country—it has the resources to cope with flood events of this magnitude… whether they happen every five, ten or 25 years.

Can Flood Walls Reduce Resilience?

In early December 2015 Storm Desmond hit, bringing an “atmospheric river” to the northwest of England with its headwaters snaking back to the Caribbean. It broke the U.K.’s 24 hour rainfall record, with 341.1mm of rain recorded in Cumbria.

Just three weeks later, while a great anticyclone remained locked in place over central Europe and the atmospheric flows had only shifted south by 150km, Storm Eva arrived. The English counties of Lancashire and Yorkshire were drenched during December 26th, and the media was once more overwhelmed with flood scenes—streets of Victorian-era houses inundated by 30-40cm of slow-moving water.

Journalists soon turned their attention to the failure of flood protections in the affected regions. In one interview in Carlisle, a beleaguered Environment Agency representative commended their defenses for not having failed—even when they had been overtopped. If the defenses had failed, maybe the water would not have ponded for so long.

 The call for “resilience”?

The call has gone out worldwide for improved “resilience” against disasters. As outlined by the UN Secretary General’s Climate Resilience Initiative, resilience is defined as the ability to “Anticipate, Absorb and Reshape” or “A2R”.

How did the U.K.’s flood defenses match up to these criteria in December? Well, as for the two “A”s in A2R, the residents of Carlisle did not anticipate any danger, thanks to the £38 million spent on flood defenses since the last time Carlisle had a “1 in 200 year” flood in January 2005 (which hit 1,900 properties). And the only thing the houses of Carlisle were absorbing on the first weekend in December was the flood water seeping deep into their plaster, electricals, and furnishings. As for “reshaping”, beyond the political recriminations, now is the time for some serious thinking about what constitutes resilience in the face of floods.

A flood wall is not the same as resilience. Resilience is about the capacity to recover quickly from difficulties, to bounce back from adversity. Organizations such as the UK’s Environment Agency may be good at building flood defenses, but not so proficient at cultivating resilience.

A flood wall can certainly be part of a culture of resilience—but only when accompanied by regular evacuation drills, a flood warning system, and recognition that despite the flood wall, people still live in a flood zone. Because flood walls effectively remove the lesser more frequent floods, the small risk reminders go away.

A growing reliance on the protection provided by flood walls may even cause people to stop believing that they live in a flood plain at all, and think that the risk has gone to zero, whether this is in New Orleans, Central London or Carlisle.

Even when protected by a flood wall, residents of river flood plains should be incentivized, through grants and reduced insurance rates, to make their houses resistant to water: tiling walls and floors and raising electrical fittings. They should have plans in place—such as being ready to carry their furniture to an upper floor in the event of an alert—as one day, in all probability, their houses will flood.

Given the U.K.’s recent experience we should be asking are people becoming more resilient about their flood risks? It sometimes seems that the more we build flood walls, the less resilient we become.

Are (Re)insurers Really Able To Plan For That Rainy Day?

Many (re)insurers may be taken aback by the level of claims arising from floods in the French Riviera on October 3, 2015. The reason? A large proportion of the affected homes and businesses they insure in the area are nowhere near a river or floodplain, so many models failed to identify the possibility of their inundation by rainfall and flash floods.

Effective flood modeling must begin with precipitation (rain/snowfall), since river-gauge-based modeling of inland flood risk lacks the ability to cope with extreme peaks of precipitation intensity. Further, a credible flood model must incorporate risk factors as well as the hazard: the nature of the ground, such as its saturation level due to antecedent conditions, and the extent of flood defenses. Failing to provide such critical factor can cause risk to be dramatically miscalculated.

A not so sunny Côte d’Azur

This was clearly apparent to the RMS event reconnaissance team who visited the affected areas of southern France immediately after the floods.

“High-water marks for fluvial flooding from the rivers Brague and Riou de l’Argentiere were at levels over two meters, but flash floodwaters reached heights in excess of one meter in areas well away from the rivers and their floodplains,” reported the team.

This caused significant damage to many more ground-floor properties than would have been expected, including structural damage to foundations and scouring caused by fast-floating debris. Damage to vehicles parked in underground carparks was extensive, as many filled with rainwater. Vehicles struck by more than 0.5 meters of water were written off, all as a result of an event that was not modeled by many insurers.

The Nice floods show clearly how European flood modeling must be taken to a new level. It is essential that modelers capture the entire temporal precipitation process that leads to floods. Antecedent conditions—primarily the capacity of the soil to absorb water must be considered, since a little additional rainfall may trigger saturation, causing “saturation excess overland flow” (or runoff). This in turn can lead to losses such as those assessed by our event reconnaissance team in Nice.

Our modeling team believes that to achieve this new level of understanding, models must be based on continuous hydrological simulations, with a fine time-step discretization; the models must simulate the intensity of rainfall over time and place, at a high level of granularity. We’ve been able to see that models that are not based on continuous precipitation modeling could miss up to 50% of losses that would occur off flood plains, leading to serious underestimation of technical pricing for primary and reinsurance contracts.

What’s in a model?

When building a flood model, starting from precipitation is fundamental to the reproduction, and therefore the modeling, of realistic spatial correlation patterns between river basins, cities, and other areas of concentrated risks, which are driven by positive relationships between precipitation fields. Such modeling of rainfall may also identify the potential for damage from fluvial events.

But credible defenses must also be included in the model. The small, poorly defended river Brague burst its banks due to rainfall, demolishing small structures in the town of Biot. Only a rainfall-based model that considers established defenses can capture this type of damage.

Simulated precipitation forms the foundation of RMS inland flood models, which enables representation of both fluvial and pluvial flood risk. Since flood losses are often driven by events outside major river flood plains, such an approach, coupled with an advanced defense model, is the only way to garner a satisfactory view of risk. Visits by our event reconnaissance teams further allow RMS to integrate the latest flood data into models, for example as point validation for hazard and vulnerability.

Sluggish growth in European insurance markets presents a challenge for many (re)insurers. Broad underwriting of flood risk presents an opportunity, but demands appropriate modeling solutions. RMS flood products provide just that, by ensuring that the potential for significant loss is well understood, and managed appropriately.

Understanding the Potential Impact of the Next Catastrophic European Flood

Over the past year, Europe has intermittently but consistently suffered from significant flooding.

Most recently, the Balkans experienced widespread devastation in May due to some of the region’s heaviest precipitation on record. Three months worth of rain fell in just three days. The subsequent flooding was so severe that entire towns were submerged. While it is too soon to estimate the full impact, the economic and humanitarian costs will be high.

This event follows one of the stormiest and wettest winters on record for the U.K. Remote locations bore the worst of it, and for now, the U.K. government and insurance industry appear to have largely escaped a sizeable bill, at least on the scale of previous flood events.

The events come just one year after the costliest natural catastrophe of 2013 for the insurance industry, when flooding inundated Central and Eastern Europe in late May and early June. The event caused around $20 billion (€12 billion) in economic losses, of which it is estimated that approximately 20 percent was insured.

As with the more recent Balkans and U.K. events, the May 2013 flooding followed a period of extreme rainfall; consequently, groundwater and soil moisture levels were saturated. As more rain fell in late May and early June, the precipitation had nowhere to go except to flow through catchments into the river network as runoff. The Danube, Elbe, and other rivers overflowed, resulting in significant flooding across Germany and the Czech Republic, and, to lesser extents, Austria, Switzerland, Poland, Slovakia, Hungary, Croatia, and Serbia.

Each of these events highlighted the importance of understanding the impact of precipitation, whether from a short, intense period of rainfall, prolonged wet conditions, or a combination of these characteristics. In each case, to evaluate flood risk, it is vital to understand how antecedent wetness conditions influences subsequent flooding.

In 2002, Central Europe was similarly inundated by severe flooding, producing economic losses of over $28 billion (€17 billion). Both events were triggered by similar meteorological phenomena, Genoa type-lows. However, the antecedent conditions in 2002 were comparatively dry compared to those in 2013, and the precipitation that triggered the eventual flooding was more severe in 2002 compared to 2013.

Both events had significant impacts, but what would happen if we combined the worst features of both to create a “perfect storm” type of flood event?

Combining the antecedent wetness of spring 2013 with the extreme precipitation of the August 2002 event, RMS researchers estimated how severe this “perfect flood” could be. Results of this study show a substantial increase in peak flow (more than 50 percent on average) for both the Elbe and Danube rivers.

Elbe River flood hazard map for a "perfect flood event," Riesa, Germany

Elbe River flood hazard map for a “perfect flood event,” Riesa, Germany

In certain locations, this scenario would be characterized by a flood extent (shown above for the area surrounding Riesa, Germany) of about 2.5 times that observed in 2002. But given the remarkable non-linearity between hazard and damage, RMS research estimates that the increased losses could aggregate to a total economic loss of approximately four times the 2002 losses. While this is a theoretical scenario, it is also an entirely realistic one.

The events that have occurred since May 2013 are a stark reminder that flood is a peril from which much can be lost.

After the 2002 flooding, flood defenses were improved in some locations, such as Prague, resulting in less severe flooding. However, because both the flood hazard itself and the physical environment change over time, Europe’s flood risk must be continually and holistically assessed to ensure that we are prepared for when, not if, a similar event occurs again.