Flooding caused by torrential rainfall across parts of southern France and Italy is likely to become the next big insured loss to hit the re/insurance industry this year. The rainfall was triggered from a rare extratropical storm in the Mediterranean which began as a low pressure system and resulted in an almost hurricane like storm.
According to risk modeller AIR Worldwide, these types of storms have occurred about 15 times over the last 20 years, when a low pressure system feeds off the warm waters of the Mediterranean (in the same way hurricanes do), intensified and became a threat to land. This particular storm began life as extratropical storm Rolf and intensified to have tropical storm force winds with gusts as high as 95mph.
Torrential rainfall was widely experienced, with the French region of Var receiving over 400mm in a few days and Genoa in northern Italy receiving as much as 350mm of rainfall in just a six hour period. Widespread damage has occurred as a result of this storm although no estimates have been submitted by risk modellers yet.
However, the French state-owned reinsurer Caisse Centrale de Reassurance has issued a statement estimating insured losses to be between €550 million and €800m. They have calculated the damages for the southern French region from the Atlantic Pyrenees to the Alpes-Maritimes and Corsica. They say that the estimate is subject to uncertainty and its thought likely that it will result in an insured loss at the upper end of this estimate.
Flooding is going to contribute a significant amount of losses over the course of 2011 with many of the claims in Queensland, Australia having been filed this year, the flooding in Thailand which is set to cause billions in losses and now this flooding event in Europe (amongst many other hydrology events). As the most common natural catastrophe which causes losses to the re/insurance industry it is surely time to look deeper into ways to transfer flood risks to the capital markets.
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