Mark Weatherhead, Head of Model Development - International
Flood poses particular challenges for modelling. In particular, the hydraulic modelling of flood extents requires a high-quality digital terrain model that has been processed specifically for the task by removing features like bridges.
The computational demand for hydraulic modelling is very high, especially as the size of the area to be modelled increases and flood is also one of the few perils that humans can directly influence through the construction of defense structures. Unfortunately, detailed data on the presence, construction standard and operational regimes of defenses is not universally available, and so considerable effort is needed by modellers to quantify this aspect.
Finally, as flood damage occurs in a fairly binary manner - either you are in the water or not - we need to have very accurate information on the location of the risks to be modelled, which is often lacking, especially in developing regions.
Despite these challenges the first models for flood in Europe began appearing in 2004. While commercial vendors have been slow to address the gap so far, others, including brokers, have been steadily producing models.
Guy Carpenter has produced a range of flood models for key countries and a pan-European hailstorm model based on detailed claims data.
The main challenge moving forward for companies is to bring the broad range of models available together into a single core platform, or possibly two, so that insurers can establish a comprehensive view of flood risk.