Climate change has led to an increased likelihood of heavy, high-intensity rainfall and short-term flooding, and an increase in flood-related losses as a result, but insurance coverage has remained dangerously low.
This year, heavy rains triggered floods that inundated cities in China and South Korea and disrupted water and power supplies in India, while drought threatened farmers’ crops in Europe.
Torrential rains and floods also submerged a third of Pakistan. The United Nations appealed for help for the country this week for what it described as an “unprecedented climate catastrophe”.
The United States has also been affected by flooding in recent weeks and months, particularly in Kentucky and Texas. Such events highlight the lack of confidence.
“Recent events in Kentucky, Mississippi and Texas are sad reminders of how devastating flooding can be to our lives,” Keith Wolfe, chairman of US P&C, Swiss Re, told Reuters.
“Despite the fact that the private flood insurance market has gained traction over the past few years, too many people are still uncovered against floods and the majority of those affected by these events are uninsured, which leaves them picking up the pieces at their own expense.”
The potential for growth in insurance coverage is enormous, according to Swiss Re. Nearly 40% of the US population lives in coastal counties and 10% in flood plains.
Better data and sophisticated risk mapping and modeling are enabling more accurate quantification of flood risk and creating scope for growth for the private sector flood insurance market, according to the report.