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Summary
- The second half of the year saw a series of severe flood events across central Europe, presenting a number of short and long-term challenges to the insurance market.
- Today, insurers need next level risk insights across all flood perils, in order to build a holistic view of flood risk across their portfolios.
- To help insurers gain the level of insights they need, we worked with a third-party data provider called National Flood Data to provide comprehensive FEMA and related flood data and flood zone determinations to help address the gap that currently exists in the market.
- While there is a lot of progress being made to help provide better, more granular data insights and help organisations to respond and plan for events more effectively, one area that is overlooked is the link between the assets themselves.
- What does this look like in practice? By combining geocoding enrichments overlaid with up-to-date flood zoning location data, Insurwave’s AI provides a granular view of risk insurers can base their prices on.
- This additional level of detail this third-party data unlocks allows underwriters to identify the most appropriate cover, priced accurately thanks to localised flood terms data.
As the severity and frequency of natural disasters continue to rise, the insurance industry is faced with an urgent need to enhance its resilience and provide innovative products and services to the markets it serves. Today, insurers need next level risk insights across all flood perils, in order to build a holistic view of flood risk across their portfolios. One solution to address this need lies in the adoption of insurance technology, which can play a key role in both predicting and responding to natural disasters.
The importance of technology
A recent report from Verisk estimates that global natural catastrophe losses has reached an average of $151 billion per year, with $119 billion attributed to non-crop-related losses.
The second half of the year saw a series of severe flood events across central Europe, presenting a number of short and long-term challenges to the insurance market. From flash floods in Valencia costing billions in economic and insured losses to eight major flood events from August 2023 to August 2024 in Germany, there is a clear need for better prediction and preparedness.
Aftermath of Valencia flash floods | David Ramos/Getty Images
As the risk of flooding increases, data plays a central role in helping insurers understand and manage these challenges. One such example is satellite data, which has become a vital tool in this effort, offering detailed insights into flood events. This satellite flood surge data provides a precise understanding of the extent, frequency and intensity of floods, allowing insurers to respond quickly and make informed decisions.
To help insurers gain the level of insights they need, we worked with a third-party data provider called National Flood Data to provide comprehensive FEMA and related flood data and flood zone determinations to help address the gap that currently exists in the market.
Addressing current gaps in the market
While there is a lot of progress being made to help provide better, more granular data insights and help organisations to respond and plan for events more effectively, one area that is overlooked is the link between the assets themselves e.g. residential and commercial buildings and their proximity to flood zones.
Currently, the majority of the schedule of values provided to the underwriters do not reveal which flood zones a portfolio of assets may be in. Obtaining this information to inform catastrophe pricing has not always been possible, with insurers having to go through several different, time-intensive steps to link the two together, making pricing appropriately for flood exposure difficult. This is particularly prevalent in the US, where the Federal Emergency Management Agency (FEMA) created the FEMA Flood Map Service Center (MSC), the official online location to find all flood hazard mapping products created under the National Flood Insurance Program.
The introduction of this service meant that depending on the zone where an asset is located, the insurance terms associated can have significant differences between them. With such a rise in flood-related cat risks, having this level of misunderstanding of exposures affecting the assets you are insuring is costly.
Insurers are placing greater importance on understanding and improving the integrity of the data on which they base their underwriting and exposure management decisioning on. This is why we partnered with National Flood Data to add this additional level of clarity to our clients' submissions.
How Insurwave’s technology has improved flood risk assessment
What does this look like in practice? By combining geocoding enrichments overlaid with up-to-date flood zoning location data, Insurwave’s AI provides a granular view of risk insurers can base their prices on.
Ultimately, this provides three key benefits:
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This additional level of detail this third-party data unlocks allows underwriters to identify the most appropriate cover, priced accurately thanks to localised flood terms data.
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Secondly, the elevation data allows for greater exposure management, a welcome benefit given the likelihood of greater nat cat events in the future.
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Thirdly, in the US, the National Flood Insurance Program, a government-backed scheme, provides state-backed flood insurance based on the FEMA zone you’re in. Our partnership also takes these into account and can apply additional NFIP terms in a more granular and accurate way
Data leads the way
While immediate responses to floods are crucial, the insurance industry must also plan for a future with potentially more frequent and severe flood events. By using granular data from satellite imagery or third-party data providers like National Flood Data, insurers can gain access to much more granular exposure data to help refine their models and better prepare for future flood risks. This enables them to focus mitigation efforts where they are needed most.