The ripples of heavy cloudbursts

Sudden torrential rainfall, also known as “heavy cloudburst,” can happen anywhere. As such, these events are difficult to model and increase the chance of the insurance industry underestimating their effect

What do Hull (UK), Istanbul and Copenhagen have in common? All three are big cities, but they have also been heavily affected by sudden torrential rainfall in recent years.

Hull endured rainfall levels of between 100mm-135mm over a three-day period in June 2007. Istanbul saw levels of up to 130 mm in a two-day period in September 2009. In July 2011 a heavy cloudburst dumped about 160mm of rain over Copenhagen in less than 24 hours, topping record rainfall amounts the year before. The insurance industry should be aware of the losses that heavy cloudburst can incur.

The cost of city life

Cities are especially vulnerable to heavy cloudbursts. One factor is the high concentration of buildings and other assets. Average claim size for residential structures is typically low but can be substantial for commercial and industrial businesses.

Total insured losses are strongly driven by the high number of claims. The Hull flooding cost the insurance industry about USD 270 million, Istanbul losses were at USD 430 million, and Copenhagen could cost more than USD 800 million.

Impervious city surfaces are the second factor. Concrete and asphalt, for example, do not absorb water as soil or other natural surfaces do. One consequence of this is that large amounts of rainwater drain through sewer systems. Once system capacity is exceeded, water overflows and penetrates into basements and ground floors of buildings.

Climate cycles heavily influence the size of torrential rainfall losses in two ways. Firstly, in high activity phases, extreme rainfall values are higher than in low activity phases. Secondly, most municipal storm water systems in Europe were designed between 1950-1970, a period characterized by lower precipitation intensities. Therefore, most systems are not adequate for today's high cycle activity precipitation rates.

Far-reaching impact

Depending on the type of coverage, heavy cloudburst losses directly affect primary insurance and losses can grow into reinsurance programs.

Local torrential rainfall events in city areas are typically not well represented in probabilistic flood risk models, and there is a strong risk to underestimate the contribution of such losses in the costing. This is even more important for those markets in which no probabilistic flood costing methodology is available. In addition, torrential rainfall is not only an issue for property insurance but also causes high losses in motor hull business.

With issues such as the effects of climate change, which heavy cloudburst may be one of, and the growth of cities slowly becoming interconnected, unpredictable weather will remain a large risk of modern life.

Published 24 October 2011

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