Floods: an insurable peril, yet underinsured

Floods cause massive uninsured losses in vulnerable countries, but wider coverage is achievable

Floods are the leading cause of losses in the world of natural hazards. They sweep away lives and homes, affecting a high number of people across many geographies and placing the greatest financial strain on economies when compared to all other types of natural catastrophe. On a yearly basis, an estimated 500 million people are affected by flooding.

Due to climate change, flooding events are increasing in frequency and severity. In many cases, populations are significantly underinsured or uninsured, and the industry is working to fill this protection gap. . Floods are insurable, and Swiss Re has been on the forefront in trying to address this disparity. We are the industry leader in flood modeling and technology, as well as in the structuring, marketing, and handling of floods claims.

In 2016, Swiss Re released country-specific flood models for Canada, Italy and Argentina. The reports illustrate the opportunity for our industry to help vulnerable countries boost resilience and prepare for flooding events of the future.

Both Canada and Italy claim extensive biodiversity and are vulnerable to a variety of flood-types, including river flooding, floods related to torrential downpours, coastal flooding, and reservoir flooding due to dam failure. Homeowners and business owners face a large flood protection gap – the vast majority of estimated losses in either country would be uninsured in case of an event. With the help of improved modeling, Swiss Re hopes to change this situation. The models for Canada and Italy specifically combine Swiss Re's proprietary Global Flood Zones technology with an event-set generation method consisting of four modules: a rainfall-runoff model, a routing model, a statistical model, and an event-set generator. Both reports include multiple 200-year flood loss scenarios throughout the different regions of each country.

Argentina is another country often threatened by water:  over the past 50 years, 75 flood events were reported including in urban areas away from water sources, which experienced flash flooding. The majority of homeowner insurance policies do not include flood cover, and most small businesses choose to rely on personal funds and government assistance in the case of losses. Currently, one in three Argentinians live in a flood zone, and the Parana basin, one of the most economically vibrant parts of the country, is at particular risk. This year we modeled flood scenarios for this region in particular, and determined that financial losses would be significant.


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