Aon Benfield broadens flood coverage for Asia

Impact Forecasting, Aon Benfield’s catastrophe model development team, is launching new catastrophe models for Malaysia and Jakarta flood at the Singapore International Reinsurance Conference this week.

The average frequency of a major flood in Malaysia is once every three years, although major insurance losses have been less frequent. However, due to increased exposure concentrations and evolving urban environments, these historical events are poor indicators of future loss potential.

Impact Forecasting conducted field studies that indicated large accumulations from high value commercial and industrial properties in the flood plains. This data was used as the basis for the new model.

Similarly, Asian megacities present a challenge in accurately assessing insured flood risk due to large concentrations of risk. Jakarta, with its continual history of flooding, demonstrated the need for a flood model to fully understand the potential financial implications. Impact Forecasting worked with Jakarta City Government to take into account land subsidence and recent mitigation works when developing the probabilistic tool.

Adityam Krovvidi, head of Impact Forecasting in Asia, said: “Ever since the Thai floods of 2011, the re/insurance industry has been keen to grasp the implications of this peril throughout the Asia region. Now, coupled with other factors such as increased urbanisation and detariffication in Malaysia, we have addressed these challenges with models that can fulfil regulatory and rating agency requirements—in addition to the more traditional use of driving accurate reinsurance purchase.”

Brad Weir, head of Aon Benfield Analytics for Asia, added: “Malaysia’s costliest economic loss of $580 million came from the December 2014 flood, while an event in January 2013 left Jakarta with economic damages around $3.4 billion, so we have seen how flood events have the ability to impact the industry from both severity and frequency perspectives.

“Having a robust solution to understand and remove the uncertainty of its potential is crucial in supporting risk management decisions. Our clients are able to access and leverage the significant investment made by Impact Forecasting through these high resolution flood models to support effective reinsurance purchasing, individual risk rating and the development of sound underwriting strategies.”