March 19th, 2013

Extension of Guy Carpenter’s Asia Flood Model to China

Posted at 1:00 AM ET

Floods are among the most destructive hazards and as more people move to urban areas, flooding is having a growing impact on larger populations and economic losses.

Flood risk is prevalent and increasing in almost every developing economy. Recent studies by Swiss Re1 and the Organisation of Economic Co-operation and Development (OECD)2 suggest flood loss potential will grow as emerging economies continue to prosper.

This development is especially true in Asia Pacific. The Swiss Re study on flood risk in emerging markets ranked developing nations by flood exposure. China tops the list for the highest flood risk in emerging markets, followed by the other BRIC nations (Brazil, Russia and India) and Thailand is ranked seventh and Vietnam is tenth. This heightened flood risk, combined with the expected rapid increase in economic growth and insurance penetration in these countries, emphasizes the flood loss potential in emerging countries, particularly in China and India where several large industrial parks are located.3

Guy Carpenter has long recognized the potential impact of significant flood losses in Asia. (Re)insurers covering risks in key urban areas in China now have the means to better manage their flood exposures with a model developed by Guy Carpenter in conjunction with an independent research and consultancy organization specializing in hydraulic flood modeling software. The model allows for analysis up to a 500-year return period and enables clients to better estimate their probable maximum losses at various return periods based on their commercial, industrial and residential exposure.

Guy Carpenter first introduced its pioneering Asian flood model in 2008, applying the experience gained from its successful European flood model developments. The European experience was combined with its local knowledge of the flood hazards of specific regions of Asia. This led to the release of the first flood model for Thailand where its focus was the Chao Phraya basin.

In 2011 the Asia flood model coverage was extended to the main flood risk areas in Jakarta, Indonesia, where increasing population pressure and subsidence of areas already under mean sea level have been contributing to an increase of flood risk. Again, the release represented the first flood model in the country. In 2012 Guy Carpenter released the flood model for India, which covers 23 major urban areas. 

The flood modeling coverage has now increased with the expansion to China, where flooding is likely one of the most costly perils the country faces. Once again, the model is the first available in China. The initial roll-out covers ten urban areas, including, Shanghai, Guangzhou and Nanjing, and also the area around Taihu lake.

With the continued growth of the (re)insurance sector in Asia and the correlated need for better risk management information, Guy Carpenter is committed to the continued expansion of its Asia flood model in this dynamic part of the world.

Notes:

1.  Swiss Re - Natural Catastrophes and Man-Made Disasters in 2011: Historic Losses Surface from Record Earthquakes and Floods.

2.  Nicholls, R. J. et al. (2008) - “Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes: Exposure Estimates”, OECD Environment Working Papers, No. 1, OECD Publishing.

3. Guy Carpenter Develops Database of Industrial Estates in China, Taiwan, Thailand and Indonesia 

 

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