Fathom’s new US flood model features climate & hurricane future scenarios

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Research led flood risk model developer Fathom has launched a new U.S. flood model that provides 100% nationwide coverage and incorporates the ability to look at how climate change could impact flooding, as well as how changing hurricane behaviour may affect losses.

flooded-signFathom’s new U.S. flood catastrophe risk model provides all-encompassing coverage of the country, so much so that the modeller claims it reveals that FEMA flood data misses around three-quarters of total flood exposure nationwide.

Fathom-USv2 is said to be the most comprehensive flood modelling of the United States ever undertaken and its output is certain to be of interest to insurance and reinsurance markets, as flood and water-driven losses continue to rise.

Flooding is the most common and costly natural peril in the U.S., Fathom says, highlighting that still update of private flood insurance is too low and much of the losses associated with flood go uncovered by insurance and reinsurance.

In addition, catastrophic flood impacts are forecast to increase due to our changing climate, with more rainfall and rising sea levels both potential factors that could increase losses for the insurance, reinsurance and also insurance-linked securities (ILS) industry.

Fathom’s new model incorporates climate factors to allow it to display a current climate change scenario for 2020 as well as a 2050 future climate state.

As well as being the first national-scale U.S. flood model to provide climate change scenarios, Fathom’s new risk model also looks at how hurricanes drive flood risk and leverages synthetic hurricane data to forecast changing hurricane behaviour and its effect on flood impacts.

Dr. Christopher Sampson, co-founder of Fathom, commented, “With the launch of Fathom-USv2, we are delivering a step-change in flood risk for the US insurance industry. We are seeing evidence that climate change is already affecting global weather patterns, including hurricane intensity, and yet until now there has been no systematic attempt to account for it when modelling flood risk at the national scale. Coupled with the limited coverage of existing FEMA flood maps, it is no surprise that flood risk exposure has been significantly understated to date. The complex data analytics and blanket coverage of Fathom-USv2 will now enable not only insurers, but also individual members of the public, to confidently forecast flood risk and put in place the appropriate mitigation measures.”

Fathom’s new flood risk model features inland and coastal outputs.

The inland flood model makes use of the latest terrain and river network data, explicitly covering every watercourse regardless of size, Fathom said.

On the coastal side, flood risk is quantified taking into account storm surge and extreme high tides, with coverage across the entire east and west US coastlines.

Fathom-USv2 also uses data from more than 50,000 synthetic hurricanes from the Massachusetts Institute of Technology to reflect the influence of increasing storm severity and how it can affect both inland and coastal flooding.

The new flood model has been validated against the entire FEMA flood hazard catalogue, with this analysis showing that Fathom’s model provides 100% coverage, compared to FEMA’s 60% and suggests that current FEMA data misses around three-quarters of total flood exposure nationwide.

It’s also been compared with claims data from the National Flood Insurance Program and demonstrated close correlation for high frequency flooding events.

Flood risk is an increasing concern for the insurance and reinsurance industry, both in how it is understood as well as the rising losses experienced over recent years and also in how more of it can be underwritten by the private market.

It’s equally a rising concern on the insurance-linked securities (ILS) space, as ILS funds are increasingly assuming flood reinsurance exposure, especially coastal flood and surge risk from wind storms such as hurricanes. The ILS market has also assumed direct flood risk through FEMA’s FloodSmart Re flood catastrophe bond series of deals.

While at the same time, ILS investors have concerns related to climate change and how it effects exposure their assets and investments may hold.

As a result, an enhanced view of U.S. flood risk is likely to prove very interesting to participants in this market.

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