Unlocking Flood Coverage: Leveraging Data and Technology for Accurate Risk Assessment

The Evolution of Flood Insurance

Flood risk has long been one of the most destructive and complicated perils for property owners and insurers alike. Historically, the private market avoided covering flood risk, necessitating the establishment of the National Flood Insurance Program (NFIP). However, advancements in data collection and computing power have transformed the landscape, making flood coverage a burgeoning opportunity for insurers.

The Role of Data in Flood Risk Assessment

Anil Vasagiri, Senior Vice President for Property Solutions at Swiss Re, highlighted in a recent discussion with Triple-I CEO Sean Kevelighan how the integration of multiple data sources has enabled insurers to more accurately assess flood risks. This has led to increased capacity and a growing number of private insurers offering flood coverage since 2016. Notably, over 90% of natural catastrophes involve flooding, underscoring the critical need for accurate risk assessment.

The Impact of Risk Rating 2.0

The timing of the private market's growing interest in flood risk coincides with NFIP's Risk Rating 2.0, a new pricing methodology aiming to make flood insurance premiums more actuarially sound and equitable. This shift aligns premiums more closely with individual properties' flood risk, resulting in some policyholders seeing price reductions while others face increases. Swiss Re's acquisition of Fathom, a company specializing in water-related risks, exemplifies the industry's commitment to closing the flood protection gap.

For readers, staying informed about these developments is crucial. Understanding how data and technology are reshaping flood insurance can help property owners and insurers alike make more informed decisions. Engaging with resources like Triple-I's 'State of the Risk' and 'Trends and Insights' briefs can provide deeper insights into these evolving trends.