Flood disasters and insurance

Worldwide, flood is the number one cause of losses from natural events. Flood insurance has attracted more and more attention in recent years, not only in the fields of science and politics but also within the insurance industry itself. Although the list of great natural disasters is headed by storms, and despite the relatively low density of insurance against flooding, the large number of local flood events constitutes a large interest for the insurance industry. Flooding comes in various forms, ranging from storm surges to flash floods and from sometimes country-wide river floods to glacial lake outburst and dam break floods. These different forms of flooding are important when it comes to insurance concepts, for which adverse selection plays an important role. Various concepts for the field of flood insurance have been investigated and discussed in different countries. In Germany, the insurance industry, in a combined effort, has launched a project to identify zones of similar risk resulting from river floods for the whole country. The identification of possible clients and the calculation of premiums are two uses of the developed model, as well as the assessment of probable maximum losses. Only river floods are considered in the model, flash floods and storm surges are excluded; flood control measures are not taken into account either.