Swiss Re and Allianz map out and price flood risks in Brazil

“Brazil has a great deal of potential, but floods are one of the main obstacles to its development," says Charles Lutz, Senior Property Underwriter, Swiss Re.


Pictured, left to right, are Charles Lutz, Igor Di Beo and Rubens Teixeira of Allianz and Swiss Re's Stephane Godier

A groundbreaking partnership benefits both Swiss Re and Allianz, opening up the market for sustainable flood risk coverage in Brazil, a country with a large and growing potential flood risk. The new risk modelling approach facilitates greater control of flood risk exposure and more advantageous and safer reinsurance contracts. 

Floods: a key obstacle in the development of Brazil

Hurricanes and earthquakes are not a major concern in Brazil, but floods certainly are. A recent Swiss Re study estimates that some 33 million people are currently exposed to the threat which causes annual losses totalling USD 1.4 billion. And the number of events is likely to increase over the next 15 years: according to the study, 43 million Brazilians will suffer from the effects of flooding in 2030, and damage will triple to USD 4 billion.

So far, the available insurance offering in Brazil has not been compatible with the areas and related exposures. This was largely due to the lack of risk data, which also had the effects of increasing the price for insurance and at the same time dampening demand. “Brazil has a great deal of potential, but floods are one of the main obstacles to its development," explains Charles Lutz, Senior Property Underwriter at Swiss Re. 

Joining forces to address a new business opportunity

The groundbreaking risk modelling approach carried out jointly with Allianz could be the first big step towards changing the current scenario. Swiss Re's technological and flood-specific know-how and Allianz's excellent risk exposure data on its client portfolio has made it possible to contribute in an unprecedented manner to the sustainable development of the Brazilian market.

Flood risks can accumulate and represent huge financial losses unless the necessary exposure controls are in place. But they also offer a business opportunity, since most Brazilian insurers exclude it from their policies. Being able to offer this coverage in a sustainable manner and at a fair price will be a major differentiating factor in the market.

Know where you can grow: opportunities for both partners

As a result of this partnership, Allianz is the first insurance company to quantify flood risk, exercising complete control over its policies and related risks and the covered area on the Brazilian map. “Now we know where we are; how much capital we need to support this business; where we can grow and where we need to slow down our growth," explains Igor di Beo, director of Products at Allianz.

The collaboration has proven to be beneficial for both companies, and had the immediate impact of lowering costs. Allianz was able to adjust the capital utilised to actual needs and reduce its prices, while Swiss Re was able to improve its knowledge of the portfolio, thus differentiating itself in the marketplace. “This work was not just theoretical, it was focused on our growth in Brazil, and consequently will also generate more business for Swiss Re," concludes Igor Di Beo.