Harvey will reflect what reinsurers have learned since 2005
The record-breaking level of rainfall from Hurricane Harvey—combined with potentially high losses from Hurricane Irma—will help determine what, if anything, the market has learned since the 2005 hurricane season, the last time several major hurricanes made landfall.
This is according to Adam Podlaha, head of Aon’s Impact Forecasting team, who spoke to Monte Carlo Today about whether he think these events will serve as a wake-up call to the industry.
“The wake-up call is more like ‘it has finally happened’, as everyone from meteorologists to the industry knew that a hurricane along this path was likely to happen at some point,” said Podlaha.
“It will encourage the market to become re-focused on US hurricane risk—which has been very quiet for a long time—while reinforcing the fact that flood risk remains a major part of the loss that insurers need to prepare for.”
He stressed that the market should not see Harvey as an unprecedented event, as everyone knew it was going to happen one day.
Flood remains one of the most challenging perils to model even in developed countries, according to Podlaha. It becomes even more difficult to assess in regional markets because of the differing ways countries insure it.
He suggested the US situation is an interesting one. The federal government has long been the driver of flood insurance policy issuance but now the private market has started to show more interest.
This has partly been on the back of better risk modelling technologies that are starting to emerge, such as elevation data and sophisticated remote sensors.
“Elevation data is improving and with enhanced IT we can calculate potential flooded areas faster, in real time—and potentially even forecast. Combined with more sophisticated remote sensing—aerial and satellite—this can help to quantify the effect of events like this more quickly,” Podlaha said.
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