commercial risks claims data available in
the direct and facultative market, but it’s
not easily available to model developers.
The clamor for data
The factor that has limited the availability of relevant data is that floods have not
been modeled widely by re/insurers, so
these professionals have had no incentive
to collect it. That has changed. Now that
U.S. flood models exist in abundance, demands for more and better flood-related
data will multiply.
Brokers and carriers will begin to
model U.S. flood risk, especially in highly
commercial classes such as Direct &
Facultative Property. Today, most D&F
books do not gather flood-specific data
for modeling, while good quality data is
provided for wind and earthquake risk.
Flood risk factors such as ground- and
first-floor elevation and the distribution
of values with height including basements are not significant for underwriting those hazards.
Even geo-location has been limited to
a simple street address for most D&F insurers, which does not help flood modelers very much. A power plant, hotel
or research facility may be set back significantly from the road and sited next
to a river. Flood requires a high level
of geo-location resolution for accurate
modeling, since one or two feet of elevation can make all the difference. Demand
for this enhanced risk data will increase
rapidly, driven in part by reinsurers
spooked by recent flood events. Insurers
will have to begin to populate data fields
previously left empty.
The demand for data will rise as flood
models are released and improved. Both
Ambiental Risk Analytics and JBA Risk
Management have U.S. tools in development, so the market could soon have a
choice of seven U.S. flood models. When
earthquake models were first introduced
in the early 1990s, it took several years
to accumulate the data necessary to get
them right. We can expect the refinement
of flood modeling tools and techniques to
be similarly drawn out, notwithstanding
any real or perceived long-term changes
to the hazard caused by climate change,
urbanization or anything else that might
cause floodwaters to rise.
Federico Waisman, Ph.D. (Federico.
Waisman@arielre.com) is SVP and head
of analytics at Ariel Re.
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