Product Family
Jon Gale


Chief Underwriting Officer, Reinsurance, AXA XL



It’s no accident that the origins of contemporary civilization sprang up on fertile floodplains. The annual floods along the Nile, Tigris and Yellow Rivers were welcomed as they returned nutrients to the soil and replenished the groundwater, creating ideal conditions for intensive agricultural production.

However, as towns and cities developed alongside major rivers worldwide, floods took on a new, modern context: destructive as opposed to regenerative. And that has led to ongoing efforts to minimize their capacity to wreak havoc in our lives.

Massive investments have been made, for instance, in engineering solutions designed to constrain floodwaters; meanwhile, our predictive capabilities continue to improve. Today, detailed flood maps exist for virtually every location where floods pose a significant risk to people and property. Combined with increasingly sophisticated weather forecasting, we can now predict – further in advance and with greater accuracy – areas that will be affected by flooding as well as the duration and extent of the impacts.

The role of insurance
All these factors notwithstanding, floods remain highly destructive. In 2018, for instance, there were 384 catastrophic hydrological events; these represented 48 percent of the 800 weather-related catastrophes recorded that year. These floods and mass movements caused more than 3,700 fatalities, almost USD 25 billion in economic losses and USD 4.6 billion in insured losses.

We can’t, of course, reduce the number of extreme weather events that occur every year. And as the world continues to warm, hydrological events are expected to become even more frequent and intense. So, the question remains: What more can be done to limit the destruction?

We have ample evidence and experience showing how engineering solutions along with public policy measures can help protect communities. We also have considerable insight into steps that can be taken pre- and post-event to support fast and effective responses and, in turn, reduce recovery times.

What is less well understood is the relationship between insurance penetration and the pace of economic recovery. Intuitively, we know the speed and scale of protection that the re/insurance industry provides can dramatically reduce the recovery time for communities suffering from extreme catastrophes. But, by how much? And, how is re/insurance best structured and deployed?

Because these questions haven’t been studied in detail, AXA XL has partnered with the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School (“CCRS”) to examine more than 100 catastrophes. By analysing these events from multiple perspectives and comparing the outcomes, we aim to create a body of work that policymakers and governments worldwide can draw on when evaluating disaster preparedness and seeking to fully understand, from the lessons learned by others, the impact of

  • displaced populations
  • increasing personal debt levels
  • changes in the economic mix of industry
  • political upheaval
  • overall time to recover

These case studies also address the need to better recognise and explain the value of “building back better”; that is, reformative recovery where the structures are repaired or rebuilt to a higher standard to increase long-term resilience. While this approach implies higher marginal costs, the benefits are assumed to be substantial. If that is so, re/insurers need to be prepared to provide extra limits and contractual stipulations that align with “building back better”.

Putting knowledge to work
CCRS originally planned to issue a consolidated report in 2020 covering the main findings, conclusions and recommendations from the overall body of research. That will still happen. However, the case studies prepared by the CCRS are so interesting and of such quality that we’ve opted to share them as they become available.
We published two case studies last year; one focused on lessons learned from Hurricanes Katrina, Wilma and Rita, and one on Superstorm Sandy.

This year we are publishing two case studies that cover major flood events in the UK in 2007 and in Germany in 2013 .

In both cases, the CCRS team conducted extensive research into the respective events, documenting

  • how the floods unfolded: how much rain fell over what areas, the rivers that flooded and the extent and depth of the flooding
  • physical, social and economic impacts: the number of homes and businesses that flooded, the number of people directly affected, the effects on
  • infrastructure and a breakdown on the estimated direct and indirect costs
  • the disaster response effort: how well various agencies and authorities responded, as well as how the economic losses were funded, that is, via insurance, government grants/aid or directly by affected individuals/businesses.

The researchers also surveyed people directly impacted as well as those involved in the recovery process. This comprehensive set of facts and first-hand observations provided the basis and context for assessing the speed and quality of the recovery process.

Insurance companies mainly replaced like for like and experts who were interviewed for this work felt that the insurance companies helped to reduce recovery time by a year...

First gleanings: lessons learned

In both cases, the CCRS team noted some successes and shortcomings. In Germany, for instance, the 2013 floods were concentrated along the Elbe and Danube Rivers; these same catchments also experienced extensive flooding in 2002. The CCRS team found that some of the risk-reduction measures put in place after the 2002 floods “helped to ensure that the impacts and economic losses were lower in 2013”.

On the other hand, they reported that the response effort was characterized by “coordination problems in the field and interrupted collaboration between response teams”.

The researchers also observed a positive contribution from insurance:
“There was a dramatic gap in the funding available to those households that had insurance and the government aid that was offered to those who were uninsured. Insurance companies mainly replaced like for like and experts who were interviewed for this work felt that the insurance companies helped to reduce recovery time by a year”. (From the UK case study.)

At the same time, they indicated that the insurance industry can do more to promote “building back better”.

“Risk-reflective insurance premium pricing can encourage engagement with mitigation measures, for example, through insurance discounts once the measures are installed. And insured households in Germany are more likely to undertake risk-reduction measures than uninsured, suggesting that flood insurance does set an incentive for policyholders to take action. However, as yet, insurance companies do little to encourage precautionary measures”. (From the German case study.)
These case studies clearly reinforce the notion that disasters are complex events that – notwithstanding our advanced capabilities and technologies – unfold in unpredictable ways. Both underscore the importance of rigorous planning and preparation as critical enablers of flexible, agile responses. In practice, those attributes are more easily described than accomplished.

AXA XL is proud to be associated with this project, and we’re confident that by gaining greater understanding, we will ultimately develop more and better catastrophe re/insurance solutions. Just as important, these studies show the world the true value and social benefits of re/insurance.

About the author: Jonathan Gale is AXA XL’s Chief Executive for Bermuda Reinsurance. He is based in Bermuda and can be reached at

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US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
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