As losses from flooding skyrocket from one year to the next, uninsured rates are setting up for disaster.
Low levels of flood insurance are occurring at a time during which the risk and cost of damage are taking off due to more frequent and more severe events caused by climate change.
From 2011 through 2020, insured flooding losses doubled to $80B worldwide compared to the decade before.
That said, flood insurance penetration is still sitting at a worrying 18 percent, according to the recent economic insights report focused on flooding issued by Swiss Re Institute.
Climate change trends have resulted in an increased risk of high-intensity heavy rains and short-duration flooding events. This has brought on increased losses related to flooding. That said, coverage has remained exceptionally uncommon to the point that it is setting the world up for massive financial challenges moving forward.
Countries such as China and South Korea have already started feeling the effects of flooding triggered by increased heavy rains that have washed into cities. India has experienced similar disasters disrupting electricity and water supplies. One third of Pakistan has found itself submerged due to historical rains and flooding. On the other hand, in Europe, droughts have forced farmers to watch their harvests suffer.
Without flood insurance, individuals, companies and countries are without financial protection.
The United Nations recently appealed for aid for Pakistan for what it has labeled as an “unprecedented climate catastrophe.”
In the United States, Kentucky and Texas have faced catastrophic flooding over recent weeks and months. These have only placed the spotlight on the coverage gap both here and worldwide.
“The recent events in Kentucky, Mississippi and Texas are a sad reminder of how devastating floods can be to our lives,” said Swiss Re president US P&C Keith Wolfe. “Despite the private flood insurance market gaining traction over the last few years, too many people are still not covered for flooding and the majority of those impacted by these events are uninsured, leaving them to pick up the pieces at their own expense.”
There is tremendous room for growth in flood insurance coverage, according to Swiss Re’s report. Almost 40 percent of the American population is living in counties along a coast and 10 percent reside within floodplains.
