Total flood losses between 2011 and 2021 amounted to $99 billion, according to the report. However, only 18% of global economic losses from floods during the period were insured. While floods were previously considered uninsurable, better data, sophisticated risk mapping and more advanced modeling have enabled more accurate pricing of flood risk, which has created opportunities for the private sector in flood insurance.
“Recent events in Kentucky, Mississippi and Texas are sad reminders of how devastating flooding can be to our lives,” said Keith Wolfe, President of US P&C at Swiss Re. private flood coverage has gained ground in recent years, too many people are still uncovered against floods, and the majority of those affected by these events are uninsured, leaving them to pick up the pieces on their own costs.
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The report also revealed that climate change is leading to more frequent and extreme weather events. Nearly 40% of the US population lives in coastal counties and 10% lives in floodplains, with Arizona and North Dakota having the largest populations living in the floodplain combined, the Swiss Re Institute said. While floods are more likely to occur in areas where soils are sealed due to intense urbanization and rising temperatures, the household flood insurance take-up rate is only 4% .
Most residential flood coverage in the United States comes from the National Flood Insurance Program, and a major driver of underwriting rates is the requirement that flood insurance be required for loans. federally guaranteed mortgages for households in the flood plains.
With advances in flood mitigation modeling and structures, private insurers’ appetite for flood risk has increased, with a 20.5% annual growth rate in direct flood premiums written since 2016 , against a 1.8% growth in federal flood premiums, according to the report.
“The incentive for the insurance industry to protect more households in the United States is twofold,” Wolfe said. “First and foremost, the insurance industry can play an important role in helping communities get back on their feet after a disaster. Additionally, this business can now be underwritten with more confidence than ever thanks to significantly improved modeling. »
The private market is even smaller and more commercially oriented than the NFIP, with premiums of about $2 billion last year, compared to $4.7 billion for the federal program, according to the report. However, the Swiss Re Institute said there was “tremendous potential” for the private market, with an estimate between $37 billion and $47 billion, as the industry invests more in modeling and quality improvement. Datas.