New developments in urban flood risk modelling could help risk managers underwrite in previously “at risk” areas, explains Dr Justin Butler.

Recent flood events, such as those caused by Hurricane Katrina, have highlighted the need for insurers and reinsurers in many parts of the world to better understand the potential impact and damage from catastrophic flood events, particularly in urban areas.

Many of Europe's major cities, including London, Paris, Amsterdam and Rome, are at risk of flooding. In fact, between 1998 and 2002, Europe suffered over 100 major flood events, killing 700 people and causing £25bn of insured and economic losses.

At present, many insurers and reinsurers have access to flood risk information for Europe and other parts of the world. However these tend to be low resolution national-scale flood risk maps, which, in many cases, only provide an analysis of flood risk at postcode or county level. In terms of reliability, the geographic resolution that many of these models operate on tends to not lend itself to modelling flood risk in complex urban environments. As a result, flood risk in urban areas, where there is the greatest concern in terms of potential insured loss, can be oversimplified.

New developments in topographic mapping and flood risk modelling technology can provide insurers with more detailed information on flood risk for improved underwriting in “at risk” urban areas. One current area of focus is on developing flood risk maps using ultra high-detail, three dimensional city models of urban environments. These models accurately capture the complexity of flood risk within the urban fabric, modelling water flow down streets and around buildings. Information produced from these models includes the depth, duration and extent of flood water down to the individual building level, providing key information for insurance underwriting and reinsurance accumulation analysis.

As climate change increases the level of flood risk in many parts of Europe, risk managers will increasingly need to look at the issue of flood risk as part of their underwriting practices. New developments in flood risk modelling technology can be used by insurers and reinsurers to better understand flood risk in high value urban environments, thereby potentially underwriting more business, more accurately in previously uninsurable areas.