New hazard data is key to improving the response to increasing flood risk across Europe

ICEYE’s Anke Sielker and Mirka Vahtera on the importance of data in providing a more complete flood picture.

The impact of climate change is becoming increasingly evident. However, there is still a level of reluctance to recognise that extreme temperatures are becoming a ‘new normal’ driving increased flood risk.

Across Europe, flood events are increasing in both frequency and severity, with losses often occurring in territories considered at low risk of flooding. This year, insurers have faced several catastrophic floods, as extreme summer temperatures and heat waves in Southern Europe acted as a catalyst for these events.

For the insurance industry, the challenge is to improve its ability to respond to the increased occurrence of such losses. Further, there is greater requirement for public-private sector cooperation on mitigation and response measures for increasingly flood-prone areas.

At the heart of this challenge is the need for more detailed and extensive flood hazard data. These are critical to improving flood resilience, facilitating a faster response and enabling greater risk transfer innovation.

The need for a better response

ICEYE’s research has revealed a steady increase in flood events in recent years, with the European floods of July 2021 some of the worst ever seen, impacting several countries simultaneously and causing over 240 deaths.

The severity, if not the level of fatalities, of European floods was repeated this summer with significant events in Italy, Spain, Greece and Slovenia. Mediterranean countries are particularly susceptible to floods with the increase in extreme temperatures creating more maritime precipitation, while drier ground conditions result in more intense run-off.

Although adaptations for riverine flooding have accelerated – particularly for cities along the Danube – European countries have struggled to keep pace with flash floods and storm surge risk.

Insurers’ response mechanisms have also proved ineffective in some cases. Limited access to comprehensive data post event and scarcity of loss adjusters affects insurers’ ability to deploy experts quickly, impacting costs and extending settlement times – a trend expected to worsen across Europe.

However, access to near-real-time flood hazard datasets based on Earth observation satellite data combined with ground-level information can help reduce claims costs and response times – as well as make coverage more affordable for insureds. Further, the development of loss trend insights can also enable more efficient flood underwriting processes, increasing insurance penetration and supporting product innovation.

A more complete flood picture

A more complete picture of flood extent and depth estimates enables the development of point-in-time insights that both insurers and government agencies can leverage. Rapid access to such data helps pinpoint losses; measure the scale of destruction; allocate resources for flood relief; determine the level of access to affected areas for relief efforts and loss adjustment; and locate shelter for evacuees.

Improved data will also drive advances in early warning systems. This will enable insurers and their clients to implement proactive protection measures and, where possible, move high-value assets out of reach of flood waters pre-event.

Facilitating public-private collaboration

Several European governments already collaborate with the private sector on flood adaptation schemes and risk-pooling structures. We see further opportunities for public-private partnerships that leverage more granular flood hazard data.

With low levels of flood insurance penetration across Europe, there is growing potential for government and community-led insurance programs using high-resolution flood extent and depth data as a trigger.

The pioneering New York City parametric flood insurance pilot provides a good example. The multi-agency initiative enhances the financial resilience of low- and moderate-income households exposed to flood risk in the region and funds rapid cash payments post flood, with ICEYE’s hazard data used to establish when the payment threshold has been met.

Improved flood hazard information will enable new types of risk transfer transactions, including parametric structures, which, alongside commercial indemnity products, will reduce the risk of floods becoming uninsurable or coverage unaffordable.

Anke Sielker is head of reinsurance practice at ICEYE

Mirka Vahtera is strategic insurance account manager at ICEYE