Flood Risk Valuation Flood Model Evaluation and Risk Pricing Evaluation

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1 Flood Risk Valuation Flood Model Evaluation and Risk Pricing Evaluation February 26, 2019 Joseph Becker Natural Hazards/Geosciences Group GUY CARPENTER

2 Macro forces shaping flood Factors redefining the insurance industry s appetite for flood risk! PUBLIC PRIVATE PARTNERSHIPS CONVERGENCE CAPITAL TECHNOLOGY GUY CARPENTER 1

3 Evaluating flood models and data products Determining the value of tools Is the model complete? Which sub-perils does the model cover? Which unique damage functions and secondary modifiers are used in the model? Is the model appropriate? How are events defined in the catalog? How many? Geographic range? What is the criteria for event response? Is the model accurate? Do flood footprints look reasonable? Are modeled losses consistent with expectations? GUY CARPENTER 2

4 How complete is the flood model? Major sub-perils of flood Storm Surge/Coastal Pluvial Fluvial Wind and pressure differential driven flooding Associated with tropical storms Seawater/brackish water can cause significant damage Rain driven flooding or flash flooding Intense precipitation that cannot be absorbed into the ground River based flooding Water spilling into floodplain either by over topping river banks or breaching levees GUY CARPENTER 3

5 How complete is the flood model? Minor sub-perils of flood Tsunami *covered in EQ model Slope failure - Caused by earthquake, underwater landslides, volcanos Groundwater * - Long periods of sustained heavy rainfall saturate underground aquifers. Damage primarily in basements, but also on surface Sewer backup * implicitly included - Urban sewer systems overfill due to excessive precipitation Dam break * - Delhi Dam, Iowa 2010 (~50 homes destroyed) Nuisance flooding (pluvial; coastal) * Image from NPR Hurricane Irene report Mud slides - High tide flooding caused by sea level rise, land subsidence and loss of natural coastal barriers Slope failure * - Slope collapses abruptly due to instability in soil matrix Mud slides * - California Jan 2018 (>500 homes damaged or destroyed) * = not included in model Image from CNN California mudslides report GUY CARPENTER 4

6 How complete is the flood model? Vulnerability curves and secondary modifiers Flood loss models by sector Gerl T, Kreibich H, Franco G, Marechal D, Schröter K. A Review of Flood Loss Models as Basis for Harmonization and Benchmarking. PLoS One. 2016;11(7):e Published 2016 Jul 25. Elevation Ground, Building, BFE, Floor of interest, Low floor elevation (elevation certificate) Foundation Presence of basement; Foundation type; Basement finish Protection Vulnerability groups; Service equipment protection; Custom protection; Location of contents GUY CARPENTER 5

7 How appropriate is the model? Number of events Event definition varies by vendor and source; Need to match evaluation criteria with own view of risk GUY CARPENTER 6

8 Supporting flood risk management Flood aggregation management Solution: Using a flood specific risk measure like Hydrologic Unit Code or distance to coast/water rather than standard geographic boundaries. Research studies by GC colleagues validate appropriateness of using HUC 8 as accumulation metric. GUY CARPENTER 7

9 Data products for event response Matching needs with available products Precipitation Flood Footprints River Gauges Post Event Surveys GUY CARPENTER 8

10 Examining performance of hazard maps Hurricane Harvey 2017 DFIRM areas of high risk USGS reconstructed footprint USGS event footprints can be used to evaluate vendor event response footprints GUY CARPENTER 9

11 Looking into the future Anticipating changes in flood risk Hazard map products: Effective DFIRMs Preliminary DFIRMs Longer term climate and sea level rise studies Site specific studies Publicly available event footprints Vendor hazard maps SLOSH MOMs and MEOWs GUY CARPENTER 10

12 Ensuring data and models are suitable current and future needs Appropriate Accurate Complete GUY CARPENTER 11

13 Disclaimer The data and analysis provided by Guy Carpenter herein or in connection herewith are provided as is, without warranty of any kind whether express or implied. The analysis is based upon data provided by the company or obtained from external sources, the accuracy of which has not been independently verified by Guy Carpenter. Neither Guy Carpenter, its affiliates nor their officers, directors, agents, modelers, or subcontractors (collectively, Providers ) guarantee or warrant the correctness, completeness, currentness, merchantability, or fitness for a particular purpose of such data and analysis. The data and analysis is intended to be used solely for the purpose of the company internal evaluation and the company shall not disclose the analysis to any third party, except its reinsurers, auditors, rating agencies and regulators, without Guy Carpenter s prior written consent. In the event that the company discloses the data and analysis or any portion thereof, to any permissible third party, the company shall adopt the data and analysis as its own. In no event will any Provider be liable for loss of profits or any other indirect, special, incidental and/or consequential damage of any kind howsoever incurred or designated, arising from any use of the data and analysis provided herein or in connection herewith. GUY CARPENTER 12

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