Analysing flood events to build back better
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.
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.