Floods in Switzerland: an underestimated risk

Potential high flood-related losses in Switzerland may impact re/insurance industry, a Swiss Re study says.

Growing urbanisation, urban sprawl and climate change are likely to accentuate the loss potential from flood-related perils in Switzerland, according to the Swiss Re publication  Floods in Switzerland – an underestimated risk (PDF, 3.22 MB, Deutsch - 1.3 MB, Français - PDF, 1.44 MB).

The report states that an extreme flood event in Switzerland, in which typically more than 50% of flood-related damage is insured, will have a major impact across the insurance industry, from private to state-owned buildings insurers.

Floods the most significant threat

In recent decades, Switzerland has been hit by a wide range of natural catastrophes, such as floods, hailstorms, windstorms and avalanches. These natural perils have caused economic losses of differing proportions which the insurance industry has mostly absorbed. Among these natural perils, however, flooding remains the most significant threat in Switzerland, accounting for more than half of the claims burden.

"The last major flood catastrophe in Switzerland in August 2005 generated losses of CHF 4 billion – CHF 2.3 billion of which were insured losses – making it the largest natural catastrophe in the country's history," says Peter Hausmann, Swiss Re's Head of Cat Perils Europe. "Based on its proprietary risk assessment model, Swiss Re estimates a property and business interruption loss of CHF 4.4 billion for a 100-year event. This amount would almost double for a catastrophe expected on average once every 250 years and that would, for instance, flood Bahnhofstrasse, Zurich's main shopping and business district, causing significant losses."

Inspect, inform, insure

According to the report, risk management techniques based solely on current claims experience underestimate the flood hazard in Switzerland. Although methods of assessing the financial consequences of flood risks are not yet widely established, the Swiss Re flood model allows different geographical distributions of the client portfolios to be quantified and it is based on three main components: a hazard map, a probabilistic event set and vulnerability curves. These components were compiled in close collaboration with the Swiss Federal Office for the Environment (BAFU) and fine-tuned with CatNet® , Swiss Re's online natural hazard information and mapping system.

With floods around the world increasing at an alarming rate, the insurability of floods poses unique challenges for the industry and highlights the need for more reliable hazard information. To contribute to a better understanding of the risks involved, Swiss Re published Flood – an underestimated risk: Inspect, inform, insure (PDF, 3.57 MB) and introduced an entertaining and innovative flood app for iPads. Along with this report, Swiss Re aims at building the case for flood insurance and a global market for affordable flood insurance solutions.

Published 24 October 2012

Swiss Re Property and Specialty

Swiss Re Property & Specialty's seasoned professionals provide clients with a broad range of premium products, unmatched offers and tailored solutions. Closeness to the markets and an unrivalled and thorough...

Read the whole story

Expanding flood insurability in...

Frequency and severity of flood-related natural disasters in Italy has increased over the last decade. While this should sound some alarm in a natural hazards-prone country like Italy, insurance penetration...

Read the whole story