How to Prepare for Flood Season
Photographer Fida Hussain/AFP/Getty Images

How to Prepare for Flood Season

In last few years, floods have become a continuous global phenomenon. In South Asian countries, pre-monsoon and monsoon which starts in mid of June and extends till September brings extreme seasonal rainfall. During these 03 months, insured and uninsured property losses occurs due to storms, pluvial floods, flash floods and landslides.

For property underwriters, 04 types of floods and storms are major areas of interest for assessing flood related losses. These includes:

  •     Fluvial Floods (floods in rivers, streams overtopping bunds & banks)
  •    Pluvial Floods (flash floods due to heavy rains, hilly / mountainous areas)
  •   Ground Water Flooding (Level of water stored in the ground rises because of prolonged rainfall)
  •   Storm Surge (coastal floods from sea level rise due to cyclones)

Urban flooding & flash flooding

In addition, prior to the start of monsoon, insurance companies should encourage policyholders to adopt risk reduction measures such as flood barriers, property (stocks) elevation (use of pallets) and improved drainage systems, especially for prefabricated roofs drainage.

In order to make informed underwriting decision, following flood risk assessment framework can help underwriters in evaluating flood risk & for precise risk pricing.

Various steps adapted by underwriters for flood management
Flood Barrier

Real time monitoring of data regarding floods can be very crucial for the underwriters. Keeping a close eye on all the available resources and keeping updates on a weekly, if not daily basis can help insurers to develop more effective strategies to manage flood risks. Below data shows main rivers flood levels current and historical high/low levels.

For underwriters return period is also of prime importance to assess recurrence interval. I have discussed this in my previous article. Here we can discuss an example of how determine the probability of a 100-year flood occurring over a 30-year period of a home insurance where the home is within the 100-year floodplain of a river.

Calculation for Probability of 100-Year Flood Over 30-Year Period

                                             1 - (1 - p)^n                             

In this case   n = 30   &    p = 1/100 which makes p= 0.01

1 - (1 - 0.01)^30

= 1 - (0.99)^30

= 1 - 0.74

(Probability of non-occurrence = 0.74)

= 0.26 or 26% probability of occurrence

This means there is a 0.74 or 74 percent chance of the 100-year flood not occurring in the next 30 years.

References:

https: http://www.ndma.gov.pk/

https://www.undrr.org/understanding-disaster-risk/terminology/hips/mh0007

https://serc.carleton.edu/hydromodules/steps/168500.html

Khurram Shahzad Yousuf, ACA, CIP ANZIIF, ARM

Team Leader I Business Head I Business Growth I Insurance Due Diligence l Lenders' Insurance Advisor I Corporate Trainer

4mo

Thanks Irtiza. One good measure to recommend to clients is to build the property over and above the maximum level of the river beds. Though it will be costly but will save millions for clients and insurers. In 2009 floods I have seen this practically on installations.

Muhammad Obaid Khan - ACII, MBA

General Manager Commercial & Head of Garden Town Division (North)

4mo

Informative, short and yet briefly explained! Thanks for sharing the piece.

Syed Farhan Abbas Zaidi

Division Head - Lahore Main Division

4mo

Very informative Syed Irtaza Arif. Appreciate your sound knowledge

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