The Importance Of
Flood Analytics In China

The insurance market in China has grown significantly in recent years, from US $34 billion in non-life premiums in 2007 to US $224 billion in 2017 (Swiss Re, 2019a). China is now the second largest insurance market behind the US and contributes to ~10% of global premiums. However, despite rapid growth, insurance penetration remains low and there is still sizeable potential for further growth. Improved flood analytics can help re/insurers to take advantage of this latent opportunity in the market.

The current situation and projected growth

Most of the growth in the non-life sector to date has been from the massive rise in car ownership, but with a large emerging urban middle class, there will be growing demand for insurance providing coverage for homes and businesses. Government investment in large infrastructure projects will also provide a potential new source of income for insurers. With growth slowing in more advanced markets, emerging economies in Asia are forecast to drive global insurance market growth over the next decade and China is set to become the largest insurance market in the world by the mid-2030s (Swiss Re, 2019b).

With these promising forecasts, companies globally are looking to capitalise on opportunities in China. Though still dominated by domestic players, the insurance market is opening to foreign businesses. Government regulation previously capped foreign-owned stakes in local insurance companies at 50%, but recent relaxation of these rules means that foreign companies will be able to increase their stakes in joint ventures. These changes have already led to action from AXA to buy the remaining 50% stake in AXA Tianping and Allianz to set up a fully-owned insurance holding company in Shanghai this year (AXA, 2018; Allianz, 2018). On the reinsurance side, the non-life market is dominated by China P&C Re, a subsidiary of China Re, with about 50% market share. Foreign-owned reinsurers, who have had access to the market since 2003, make up the remaining 50% (Munich Re, 2016).

The need for a robust understanding of flood risk

As the scale of insurance in China increases alongside the still relatively recent introduction of the China Risk-Oriented Solvency System (C-ROSS) – a risk-based solvency regime – it is becoming more important for insurers and reinsurers providing cover to understand the risk. China is vulnerable to several perils including earthquakes, typhoons, landslides and floods, with flooding the driving cause of loss from natural catastrophes. This has been brought into focus in recent years, with significant flood events occurring each year (Floodlist, 2019).

The challenges in modelling flood in China and how improved flood analytics can help

One of the biggest challenges for assessing flood risk in China is exposure data resolution, with most reinsurers receiving province-level aggregates. To put this into perspective, Guangdong, a medium-sized province is 179,700 km squared – equivalent in size to Florida. Aggregating flood hazard to this resolution provides little insight into flood risk and higher resolution analysis is required. To address this limitation, JBA provides a tool to disaggregate exposure data from province or county level to a ‘sub-county’ resolution. This disaggregation uses our understanding of exposure density within each county based on a high-quality capital stock data and a global settlement layer.

For industrial parks where coordinate location information may be available, the challenge is different. Industrial parks can be very large and are often concentrated in low-lying regions, such as the Pearl River Delta, and therefore heavily flood-exposed. It is important to consider the range in flood potential across the entire site, not just the point by which the location is identified, which may be the entrance or a site office. Within JBA’s Continental China Flood Model, industrial park footprints have been mapped and industrial parks with coordinate-level location information are modelled using flood hazard data across the entire footprint.

Until now, catastrophe models have only captured typhoon-induced flooding, with non-typhoon flooding remaining unmodelled. Typhoon Rumbia and Typhoon Mangkhut were responsible for major flood events in 2018, but non-typhoon rainfall should not be ignored. Our model highlights the importance of non-typhoon related flooding. According to our analysis of an economic exposure dataset, average annual losses from non-typhoon related flooding account for more than a third of total flood loss. This contribution increases further when looking at the modelled 1-in-200-year loss, where almost half the contribution comes from non-typhoon related flooding. The inclusion of both non-typhoon and typhoon-driven flooding in our model provides a complete view of river and surface water flooding in China and the option to run the model with or without typhoon-induced flood events gives users flexibility to understand the specific contribution these make to flood risk.

Figure 1: Proportion of modelled economic losses from typhoon driven (TC) and non-typhoon driven (non- TC) river and surface water flooding. Source: JBA Continental China Flood Model.

Addressing these key challenges, the Continental China Flood Model can be used by insurers and reinsurers to better manage growing portfolios. Improving understanding of flood risk in China enables more robust risk-based processes that will help support a dynamic and resilient marketplace as it grows.

The Continental China Flood Model was developed in collaboration with Aspen Insurance Holdings Limited (“Aspen”). This partnership combines Aspen’s extensive market knowledge and experience with JBA’s flood modelling expertise – both needed in this relatively new and data-poor market. To find out more about the model, get in touch via the form below or check out our Executive Briefing.

Cat model access

The Continental China Flood Model can be accessed via portfolio analysis services provided by JBA or our catastrophe modelling platform, JCalf®. The model can also be accessed via Impact Forecasting ELEMENTS, Oasis and the Nasdaq Risk Modelling service.


Allianz. 2018. Allianz receives CBIRC approval for preparatory establishment of China’s first fully-owned foreign insurance holding company. [online] Available at: [Accessed 8 April 2019].

AXA. 2018. AXA to acquire the remaining 50% stake in AXA Tianping to accelerate its growth in China as the #1 foreign P&C insurer. [online] Available at: [Accessed 8 April 2019].

FloodList. 2019. China [online] Available at: [Accessed 30 April 2019].

Munich Re. 2016. China Reinsurance Market Overview. [pdf] CAS Spring Meeting 2016. Available at: [Accessed 30 April 2019].

Swiss Re Institute. 2019a. Sigma Explorer. [online] Available at: [Accessed 15 April 2019].

Swiss Re Institute. 2019b. Emerging markets: the silver lining amid a challenging outlook. Sigma. 1/2019.

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