Research suggests that flooding poses a threat to roughly 21 million people across the world every year, costing the global economy roughly $90.65 billion, with the potential for an estimated six-fold increase over the next 15 years.
Data provided in connection with the launch of a new flood mitigation platform, the Aqueduct Global Flood Analyzer tool, co-developed by the World Resource Institute (WRI), Deltares, the Institute for Environmental Studies of the VU University Amsterdam, Utrecht University and PBL Netherlands Environmental Assessment Agency, highlights the economic severity of global flooding and its potential rise.
The research, conducted by the co-developers of the tool found that by the year 2030 a startling 54 million people will be exposed to flooding, causing the annual global economic cost to hike significantly, from the $90 billion seen today to around $513 billion per-year.
With this in mind, Aon Benfield’s catastrophe modelling division, Impact Forecasting states that global insured losses from flooding over the last ten years average approximately $9 billion per-year. So a near six-fold increase could take average annual global insured losses from flooding to a staggering $54 billion, or greater, by 2030.
Hessel Winsemius, a researcher at Deltares and Philip Ward, a senior researcher at the Institute for Environmental Studies of the VU University Amsterdam, discussed the new tool and global flood resilience in a recent blog.
Part of which read; “It will take decades and many billions of dollars to protect the tens of millions of people at risk from river floods and coastal storm surges.
“But starting now and following the direction of tools like the Global Flood Analyzer will help decision makers in international relief organisations, reinsurance companies, multinational company and many others build advanced protection systems to protect people and infrastructure.”
The WRI describes the new tool as aiming to “raise the awareness of flood risks and climate change impacts by providing open access to global flood risk data free of charge.”
Users of the platform benefit from being able to see current flood risks for specific geographies, that takes into account that region’s current flood prevention projects and potential socio-economic changes for future scenarios.
Socio-economic development is seen as a key driver for the expected rise in the amount of people exposed to the peril of flooding and the potential economic/insured loss increase, something which was also highlighted by the UN in its recent disaster resilience report, as noted by Artemis.
The UN report predicts that by the year 2050 as much as 40% of the world’s population will live close to river basins that experience “severe water stress,” meaning that an alarming amount of people will be exposed to flooding and storm surges.
Both the UN and WRI study agree that developing countries will experience the heaviest impact from future flooding, due to location, low levels of insurance penetration, rising asset values and increased urbanisation.
All of which becomes amplified by the impacts of climate change, which is predicted to bring more frequent and severe flooding and a significant hike in global sea levels.
Interestingly, the WRI and co-developers blog on flood prevention and its new tool provides some regional analyses of global flooding, revealing that 15 countries account for 80% of the population exposed to river flood risk worldwide.
Adding; “the top 15 countries with greatest population exposed to river flood risk are either the least developed or developing countries, which are the most vulnerable to natural disasters and climate change.”
Typically, developing areas of the globe have significantly lower levels of insurance penetration than more developed countries, as product awareness, education and affordability is often scarce or non-existent.
“The risks may be escalating, but public and private sector decision makers can do more to prevent catastrophic damage before it happens,” explains Winsemius and Ward.
Re/insurance, insurance-linked securities (ILS), reinsurance-linked investment, catastrophe bonds and other risk financing vehicles are increasingly looking to innovate in order to sufficiently protect economies and societies from the impacts of the world’s perils, while also accessing new risks.
And the predicted rise in economic and insured losses from global flooding highlights an opportunity for the sector to provide more solutions to all regions of the world, at a time when the market is awash with traditional and alternative reinsurance capital.
Any advancement in the understanding and predictability of flooding, as offered through the Aqueduct Global Flood Analyzer, will prove invaluable to catastrophe modelling firms and divisions that model the peril.
While little can be done to prevent rainfall flooding or a typhoon induced storm surge taking place, flood-related disaster relief funds, reinsurance contracts and those alike, go a long way to building resilience post-disaster.
Something of great importance to poorer, vulnerable people who reside in developing regions susceptible to intense adverse weather events.
Of course with such an increase in flood losses predicted it is not just developing regions of the world that will see higher losses. Some of the most flood exposed regions are highly developed, which will result in greater increases in exposure and higher losses.
Here, the need for insurance and risk transfer products based on water levels, using parametric triggers, may become a suitable form of contingent risk financing for corporations and even homeowners living in regions where flood risk is rising rapidly.
An absence of sufficient protection from risk financing tools ensures that livelihoods, societies and economies can take years to recover following the devastation of severe flooding.
And as more intense flooding episodes are predicted to increase the detrimental impact of this becomes more apparent, and the need for further global risk financing mechanisms becomes as important as ever.