Flood on track to primary peril status

Traditionally classed as a secondary peril, typically resulting in small to medium-sized losses, flood is becoming an increasing concern. Individual flood events can now produce losses exceeding $10 billion, with aggregate losses climbing significantly. This positions flood closer, in terms of impact, to primary perils such as tropical cyclones and earthquakes.

Flood losses have been increasing in scale for some time and, according to Aon, have ranked among the top three loss categories from both an insurance and economic perspective for the last three years. For some insurers, flood may already be considered a primary exposure rather than a secondary one.

Recent flood events across the world

2023: China and Europe Floods

Two of the costliest global flood events in 2023 were the China floods and the Emilia-Romagna floods in Europe.

China flooding: Linked to Typhoon Doksuri (Egay), this event featured torrential rainfall that triggered severe flooding.
Europe flooding: Severe rainfall in May caused widespread damage across Italy, Bosnia and Herzegovina, Croatia, and Austria.

According to Munich Re, these two events resulted in $35 billion in total losses, but only $3 billion of that was insured, highlighting a significant protection gap.

2024: Europe and UAE flood events

Flooding continued to cause widespread disruption in 2024, with Swiss Re estimating insured losses from severe flood events in Europe and UAE at close to $13 billion.

Middle East flooding: In April, intense rainfall disrupted operations at Dubai Airport and caused flooding and loss of life across the UAE, Oman and the wider area.
Storm Boris: In September this slow-moving storm caused devastating damage across six European countries in September 2024, accompanied by fierce winds and heavy rainfall.
Spain flooding: More recently, eastern regions of Spain, including Valencia and Murcia, suffered catastrophic flooding, sadly also with significant loss of life. According to the World Weather Attribution, indications are that daily rainfall extremes in this area of Spain at the same time of year are almost twice as likely to occur and have increased in intensity by 12% as a result of the 1.3°C global warming since before 1900.

View from the UK

The UK’s Environment Agency recently published new data showing 6.3 million properties across England are based in areas at risk of flooding from one or a combination of rivers, the sea and surface water.

The EA also warned that with climate change, the total number of properties in areas at risk from rivers and the sea or surface water could increase to around 8 million by the middle of the century – or around one in four properties.

Climate change and human factors

These latest findings support many other studies that have demonstrated how climate change has increased the intensity of many of the flood events we’ve seen. These “attribution” studies illustrate how our warming planet has increased the odds of some extreme events by several percentage points, compared to a world without climate change.

Of course, climate change is not the only factor affecting flood risk. It’s further exacerbated by human factors, including changes to land use, increased urbanisation, poor maintenance of drainage systems and infrastructure, failing defences or no defences – all things that need to be taken into consideration.

And as the threat and impact of flood increases, the insurance market has a significant role to play in creating new, and innovative insurance to help mitigate the impact of flood and reduce the expanding protection gap.

Building resilience together

To be able to play its part, the insurance market needs to prepare itself for the challenges the future might hold. Part of this means embracing – and understanding - the growing availability of flood data and models to enable insurers to better manage their exposure and close the protection gap through providing the essential risk management mechanisms for governments, businesses and communities.

At JBA, as a leading science-based flood specialist, we provide flood maps (with resolutions from 5m to 30m), models and flood data for every country in the world. Our data and insight already helps drive innovation, from the use of AI through to new, robust parametric insurance solutions.

But preparing for the future needs a broad focus on resilience and mitigation such as:

Development and application of early warning systems;
Investment in flood infrastructure, including the building, maintaining and enhancing of robust flood defences, dams and seawalls;
Embracing new water management techniques; and
Efforts to improve overall flood resilience and resistance with new products and new technologies.

The insurance market, with the support of flood scientists and evolving data sources, can play a major role in helping individuals, businesses, economies and communities mitigate this increasing risk of flood.