Flood risk presentation Insurance institute 2010

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climate changeIntroduction
Weather summary Nov 2009
The costs
Changing weather patterns and the future
Risk Management –
–clients
–insurance industry
–government
Flood insurance in the future

 

bandonflood

 bandon flood2

Key observations from Bandon Experience
Electricity Power cut off in town
Mobile phone communications down as Communication mast located in Flooded Garda Headquarters
Telephone exchange flooded, land line telecoms disrupted for one week
No communication network between essential services
Divisional Garda Headquarters closed and relocated due to floods
No sandbags available to disperse before flooding
Red cross offices flooded
No pumping equipment available
No heavy earth moving equipment available

No health and safety advice provided on risk of flood waters
Local Radio Station flooded
Both town supermarkets flooded and closed for a number of days Three of the four town Banks flooded
No power to operate ATM for money withdrawal
No telecoms to operate credit/debit cards
Hotel flooded with guests including flood victims seeking temporary overnight accommodation
Two social housing units flooded with elderly residents
A large number of newsagents, clothing shops, restaurants, cafes flooded
National route into town closed due to flooding and landslides

The risk factors

Weather - November 2009

rainfallRain bearing weather front stalled over Ireland.
Rain gauge stations recorded between 2 and 3 times normal rainfall for Nov.
79% of weather stations recorded highest ever Nov monthly rainfall.
Extreme rainfall on Nov 18th/19th.
Soil saturated following weeks of heavy rainfall.
Unusually, rainfall occurred without an associated storm.

 

 

 

 

 

major flood events

IIF Figures (Feb 2010)
The combined insured property cost of the November floods and the January freeze stands at €541 million.
The insured cost of the two weather events exceeded the total cost of all serious weather events that occurred in the last decade.
The 2009 floods were the largest insured event in Irelands history

 November 2009 Flood Overview

 €244m to customers as a result of the flooding.
• €160m relating to commercial properties.
• € 76m relating to homes
• € 8m relating to motor.
 8,514 claims handled during 3-week period.
General perception that the industry responded well.

flood regional brekdown

 flood regional breakdowm

2009 Flood Losses in Context

Est. 2009 Market Gross Written Premiums € 910m.
2009 Flood Loss - €244m (27%).
2009/10 Freeze Loss - €297m (33%).

 

 Parallels with UK 2007 floods

180,000 claims
–(130,000 home, 30,000 business, 20,000 car)
Equivalent to 4 years normal claims totals
Total insured damage est. £3billion
10 months on local authorities estimated that 4750 out of 17,000 households were still out of their homes.
Source: Pitt Report

 

Climate Change

There is a widespread acceptance by climate modellers that Irish winters will become significantly wetter in the west, while summers will become drier in the east. These ultimately produce a likelihood of more frequent and more severe flood events.

The projections imply that the event which today occurs typically every 25 years could be happening every 8-10 years by mid-century and every 2-3 years by the 2080s. It follows of course that the once in, for example, 25-year event will reach heights not projected on the basis of past calculations
(ICARUS - Irish Climate Analysis and Research Unit) team at NUI Maynooth)

climate change

 

 changing risk of flood

“Many firms had inadequate or non existent plans in place to protect them from an unexpected event. A recent survey by AXA estimates that 7 out of 10 small businesses would go under if they experienced a major emergency in their first year. The survey also revealed that 90% of small businesses were underinsured for buildings cover and 41% had no business continuity or loss earnings insurance” (Pitt Report)

success

Some Benefits of Natural Hazards Modelling

Estimate property damage loss potential and business / service interruption.
Evaluate cost-effectiveness of risk financing.
Compliance and good risk management.
Prove risk awareness to the insurance market.
Premium negotiations and savings.
Prioritize mitigation opportunities:
–Develop Emergency Response plans
–Develop Business Continuity response plans

 

 

Govt response
•Overall Response to Heavy Flooding and Snowfall Unacceptable-Oireachtas Environment Committee Report
•clear absence of effective co-ordination and management of the situation
•State agencies defined their responsibilities more in terms of what they do not include rather than what they do. This led to a disjointed and confused reaction.
•independent review of the role of the ESB’s Hydro Electric Schemes re conflict
•OPW’s funding for flood risk management should be substantially increased The OPW needs to prepare a national strategy for river drainage and maintenance. Flood warning systems should be put in place on all major river systems
•Authorities should prepare specific flood and severe cold weather emergency plans and database vulnerable groups

Richard S.J. Tol - Economic and Social Research Institute, Dublin & Vrije Universiteit, Amsterdam
“A lot went wrong last winter; A significant amount of water was released from a dam, without proper warning, in the middle of the night.
Emergency workers followed the water; relief in one place exacerbated the situation in other places.
• There was confusion about who should call in the army, and when.
• I find this surreal in 2010 and unworthy of one of the richest countries in the world.
• Effective flood management requires taking responsibility, being pro-active, joined-up thinking, making hard decisions – the sort of things that Irish politicians excel at.
I would therefore expect that my recommendations will be ignored and that I’ll be saying the same things again in a few years time”

Flood Insurance Generally
Flood risks are difficult to assess and price:
• insufficient historical data
• recent urbanisation/building in flood plains
• large events/ storm surges are relatively rare and costly
• changing weather patterns
• modelling systems are still developing
• Internationally low penetration-locally high
but for how long??????
Natural occurrences we cannot control .. but exacerbated by factors we CAN control – infrastructure, planning & development, emergency preparedness, management on the ground

 

Future of Flood Insurance
Elements necessary for the sustainable provision of Flood insurance:
•Flood mapping and accurate data to facilitate risk assessment
•High penetration levels to prevent adverse selection
•Continued availability of Reinsurance
•Investment by Government in structural and non structural measures
•Deficiencies in Planning Guidelines addressed

Focus needs to be on impact mitigation:
•Flood Risk Management Plan needed for all high risk areas.
•All flood sources should be considered.
•Plan needs to be properly funded and resourced to ensure implementation.
•Stop creating new flood risks.
•Public awareness campaign necessary to get support for level of investment needed and to improve on preventative aspects.

Thoughts
Compensation as part of the disaster assistance should always have as a goal the reduction of future flood damages.
Rather than simply paying for damages, the funds should be focused on flood proofing
Could insurers set up salvage centres/ advice centres and the like
Info pack for clients
Analysis – lobby government
Scarce resources – pool them
Zoning and flood proofing measures can be used to control development and reduce future flood damages, but the effectiveness of such measures is highly reliant on enforcement and maintenance
Insurers can play a role here – look at bonus for driving