20 October 2013

PERILS to help industry grasp flood risk

Getting a handle on European flood risk is a priority for PERILS, the company that provides indices and exposure and loss data for the insurance industry.

Eduard Held, head of products at PERILS, says the Central European floods earlier this year demonstrated that the industry’s understanding of the flood risk in the regions affected is still relatively limited.

“The event was one of the most severe flood events to hit Central Europe, even exceeding the major losses experienced during the flood event of August 2002 which at the time was deemed to be a centenary event,” he said.

“It also took the industry several weeks to establish a consensus on the market-wide insured loss for the event, which in the end was put at approximately $4bn. This clearly shows that more information, such as market data from an independent source, is needed to enable a better understanding of the hazard associated with Central European floods and their impact on the insurance industry.”

PERILS is looking to expand its flood coverage to cover Central and Eastern Europe. To this end, Held said the company has started contacting potential data providing insurance companies operating in these regions.

“In terms of the potential to expand into other perils, our target is always to ensure that we have a robust coverage in any particular market. This will ensure the high quality of the market level data calculated by PERILS. However, one has to be aware that ultimately it will not be up to PERILS alone to make it happen. Only sufficient support by the markets will allow PERILS to realise such an expansion,” he said.

He added: “It is our belief that, in the aftermath of this year’s flood, the industry will be very eager to have access to independent market data on these regions which they can use for model validation and possibly the development of new industry loss based risk transfer instruments.”

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