Last week saw the launch of a new comprehensive, high-resolution flood mapping system for emerging global markets, which aims to enhance insurance and reinsurance catastrophe risk management, by SSBN Flood Risk Solutions and ImageCat.
The new platform, which is available via inhance, the exposure data analysis and visualisation software from ImageCat, aims to “fill a gap in catastrophe risk management for re/insurers and businesses,” explained SSBN.
SSBN has been collecting vital flood hazard data for the last 15 years, and also specialises in developing regions of the globe where flood data is in short supply.
As the reinsurance market sits awash with a growing volume of capital from alternative and traditional players, companies are increasingly looking to emerging markets as a means of diversifying their risk portfolios and obtaining desired returns. Emerging market flood risks are therefore an area of interest to reinsurance and ILS players currently.
Gavin Lewis, Commercial Director at inhance explained; “Clearly growth in emerging markets presents some significant risks; however if appropriate data and tools can be put in place to alleviate these risks, then these markets also present significant rewards.”
Growing international urbanisation to coastal regions, creating a rise in the concentration of higher asset values is increasing the negative financial and economic impact of flood-related risks.
This, coupled with the rising severity and frequency of flooding due to climate change, highlights the importance of SSBN’s new platform.
$25 billion of worldwide flood damages came from emerging markets in 2013 alone, a significant proportion of the year’s total global flood damage figure, of $65 billion.
A Senior Economist at the World Bank, Stéphane Hallegatte published a study within ‘Nature Climate Change in 2013,’ estimating that “increasing exposure and the potential effects of climate change could amplify flood losses to around $1 trillion a year.”
“Re/insurers can now overlay these detailed flood maps over their risk locations in inhance, so they get a better understanding of risk selection and pricing, and identify their peak exposures in territories where they want to grow,” advised Lewis.
“Without this, they are likely to be reluctant to commit sufficient capital to build a meaningful business or they risk unexpected flood related losses.”
NASA funded some initial research for the tool, which was demonstrated at a recent SSBN webinar. And in an effort to provide greater risk mitigation information through the development of a Global Exposure Dataset (GED), ImageCat is working closely with the Centre for International Earth Science Information Network (CIESIN).
Along with NASA, SSBN has also been working alongside the World Bank in various regions to provide invaluable flood hazard data to help with post-disaster relief, most recently with the devastating floods in Malawi, but also in Caribbean and African regions.
SSBN explains the benefits its flooding maps offer; “Maps that show the extent of an inundation before satellite-based observations are available allow prioritisation of disaster relief, and the model outputs are also useful in the context of flood risk management and decision making.”
Typically, insurance penetration in emerging, or developing regions of the globe is scarce, as insurance product education for those in need is often sparse or non-existent.
As more detailed software like SSBN and ImageCat’s emerging markets flood mapping platform becomes available, a greater understanding of pricing, risk selection and a better picture of those most vulnerable will become more apparent.
In return, this should enable a more appropriately priced and ultimately a far more comprehensive option for local people that are most in need of flood-related insurance protection.
Similarly, the greater understanding of a region’s potential flood exposure severity and frequency will enable better modelling for risk financing tools. Improving the view of risk will enable better risk transfer, whether they be government-backed initiatives, catastrophe bonds and ILS, reinsurance or insurance, disaster relief funds, or a combined effort.