Risks from floods, storm surges and flash floods

Underestimated natural hazards

Population density determines risk of loss

According to long-term data on natural disasters, only storms cause even more losses worldwide than floods. What’s more, climate change is increasing the probability of extreme precipitation in many regions, which will lead to more frequent flash floods and disastrous flooding.

Losses caused by flood events 1980-2019: Only some 12% were insured

Overall losses: US$ 1,092bn

Flooding accounts for some 40% of all loss-related natural catastrophes since 1980, with losses worldwide totalling more than US$ 1tn. Only 12% of these losses were insured.

This is partially due to a limited range of insurance covers in some regions and low demand, even in places known to be at risk of flooding.

In addition, many losses involve public infrastructure – such as roads, railways, dykes, riverbeds and bridges – that is usually uninsured.

Climate change is exacerbating the risk situation

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US$ bn
Floods and landslides in Thailand in 2011 resulted in the highest flood losses of all time

Rising temperatures of the atmosphere and sea surfaces are influencing precipitation patterns. Warmer air can absorb more moisture, which increases the potential for heavy rainfall. Numerous scientific studies analysed by the Intergovernmental Panel on Climate Change (IPCC) indicate a likely rise in extreme flash floods and river floods in many regions.

Flooding is regarded as the natural hazard against which precautionary measures are most effective. In Europe, for instance, the overall trend in losses (after adjustment for increases in values) has fallen – despite repeated severe floods, such as those in 2002 and 2013. There are likewise indications in North America and China that protective measures have reduced adjusted losses.

Precautionary measures

More frequent heavy rain means that flash flooding in cities far from major rivers is increasingly becoming an issue. But risk awareness remains far too low in many places. As people underestimate the financial risks, they frequently do not have adequate insurance coverage. Homeowners and business owners must then bear the costs of property losses and business interruption losses themselves. Alternatively, they have to hope that state aid programmes will provide disaster relief.

Flooding from an insurance perspective

Floods have various causes, for which there are often individual forms of cover. Each insurance product is tailored to a specific risk situation. There are three main types of flooding: storm surges, river floods and flash floods. There are also many unusual cases, including groundwater flooding, tsunamis, dam-break flows, glacial lake outburst floods, backwater floods, debris flows and mudflows.

River floods

River floods usually build up gradually – although they can sometimes happen very quickly. They usually last several days or even weeks. The geographical extent of flooding, which depends on factors such as the river’s topography, can encompass several thousand square kilometres if the river valley is flat and expansive. In narrow valleys, flooding is limited to a fairly compressed corridor along the river.

Given these possibilities, accurate risk assessments based on precise flood zones are needed to calculate insurance covers. A combination of preventive measures and insurance can minimise the overall financial burden.

Cause	Threatened areas	Loss factors	Claims	Loss prevention
Prolonged, large-scale precipitation (possibly snowmelt, tropical cyclones)	All regions near a river	- Prolonged impact of water - Water contamination (e.g. by oil)	- High loss potential (accumulation losses)	- Early warning - Structural flood control - Temporary protection of property - Relocating movable objects - Evacuation

Storm surges

Although storm surges affect just relatively narrow strips of coastline, they have huge loss potential and have generally claimed more victims than any other flood event. As climate change causes sea levels to rise, the risk of storm surges and erosion along many coastlines around the world is increasing. But investments in vastly improved protective measures and, in particular, the advancement of forecasting and early-warning solutions in recent years have reduced the impact of storm surges.

Cause	Threatened areas	Loss factors	Losses	Loss prevention
High level of water due to wind set-up,high waves	Coastal areas	- Salt water - Wave forces - Flooding	- High individual losses	- Early warning - Dykes - Evacuation - Land use

Flash floods

Flash flooding occurs when the ground stops absorbing water during brief but torrential rainfall. Thunderstorms often cause flash floods. On sloping terrain, this can trigger a rapidly rising flood wave capable of quickly flooding dry land where it has not even rained. On flat terrain, the floodwater accumulates in lower-lying hollows, basements and underground car parks. The potential for erosion and the mechanical forces associated with the high rates of flow both play crucial roles, as they can make buildings collapse and cause enormous losses.

Many people are unaware that flash floods can occur almost anywhere – even far away from rivers. In addition, it is nearly impossible to predict flash flooding. This makes short-term loss reduction measures essentially impossible. In short, the average annual overall loss from the many flash floods that occur every year is roughly equal to the loss from the rare but spectacular "once-in-a-century events" on major rivers.

Cause	Threatened areas	Loss factors	Claims	Loss prevention
Mostly local/regional heavy rain (thunderstorms)	Practically anywhere, even far away from rivers	- Mechanical impact of fast-flowing water - Possibly large amounts of sediment - Erosion	- High frequency (but not in the same place) - Relatively local	- Sufficient drainage systems - Suitable method of construction

More about flooding

Prevention and insurance solutions for water-related risks

To protect against flooding, many dykes, flood walls and retention basins are built along rivers. Loss prevention at an individual level involves measures to improve the flood resilience of buildings and structures. A natural hazards policy is the ideal way to counter the risk of flooding far from rivers and coasts. Nevertheless, policies should primarily cover the losses that can severely hit or even ruin policyholders. At the same time, such insurance must not reduce the willingness to take suitable precautions.