Modelling the unmodelled: JBA’s new probabilistic flood model for Vietnam


Five years on from the 2011 Thailand flood event re/insurers haven't forgotten the devastating effects.

One of the most common questions we’re asked by our re/insurance clients is "where’s the next Thailand?"

In the intervening years, it’s been interesting to see the industry take a more proactive approach to flood risk management. They’re now beginning to ask questions like "where am I exposed to flood?", "how much (re/insurance) cover do I need?", "what's the biggest loss I could expect from my portfolio?" and "which areas will be affected simultaneously?" But with the perennial issue of aggregate insurance exposure data, and without available maps and models, this has proved challenging.

To aid re/insurers, we’ve developed a global coverage of flood hazard maps. And in 2016, following repeated feedback from clients, we began looking more closely at probabilistic flood risk in Vietnam.

We recently released the industry's first Vietnam river and surface water flood probabilistic model, meaning our clients can be among the first to fully quantify and capture their exposure to flood risk in the region. The model highlights probable event losses, loss hotspots and loss accumulations due to correlated exposures. Here are your questions answered:

What's the annual impact of flooding in Vietnam?
Annually the average number of people exposed to flood in Vietnam is 2.1 million with the annual average loss to flood estimate at $575million USD.

Are the new industrial sites in Vietnam exposed to flood?
Over 60% of industrial parks are within the 1-in-50-year flood extent. JBA examined the locations of the major industrial parks which, buoyed by foreign investment, have grown rapidly in recent years and made attractive locations for multi-national corporations.

How are the events distributed in Vietnam?
Of the 48,000 simulated events in the JBA Vietnam model, most affect the Northern Midlands and Mountains, Red River Delta and North and South Central Coast regions. Events in the Red River Delta are the major driver of multiple regions being affected; this area includes a major concentration of exposure in Hanoi. 

Regions of Vietnam with the number of events affecting one of more regions

Regions of Vietnam, with the three most frequently flooded highlighted in orange

Can Hanoi and Ho Chi Minh City flood simultaneously?
Hanoi and Ho Chi Minh City are spatially independent, with no simultaneous flooding.  Interestingly, none of the events with an overall loss return period exceeding 200 years cause any loss in Ho Chi Minh City, which is in the Southeast region, despite it being a large city with substantial exposure.

Exposure in Vietnam is concentrated close to the populous cities of Ho Chi Minh City and Hanoi

What's the outlook for Vietnam's insurance industry?
Whilst the boom in industrial park development is beginning to slow, the insurance market is still growing with recent figures published in Asia Insurance Magazine indicating that total premium revenues in Vietnam reached $3.8bn USD in 2016, and are predicted to rise by a further 20% in 2017. As economic losses rise and the insurance gap narrows, without considered flood risk management, insured losses seem likely to follow.

What do our clients think?
Since the model's launch last month, we’ve received overwhelmingly positive feedback as insurers, reinsurers and brokers can further enhance their current risk management practice in Vietnam. Among those excited to see a new Vietnam model is UIB Asia: "Vietnam is a very important market for us and we’re extremely pleased to be making use of JBA’s new Vietnam Flood model. Vietnam flood risk, like many other South East Asian countries, is a major peril and having a full probabilistic model to assess that risk is immensely helpful. We are looking forward to collaborating with JBA to enhance the services that we provide to our growing client base in Vietnam", Doreen Tan, Head of Analytics, UIB Asia Reinsurance Brokers (Singapore).

If you're interested in understanding your exposure, cover requirements and possible losses, get in touch with ian.millinship@jbarisk.com for more information on the Vietnam Flood Probabilistic Model.