Worldwide insured losses from floods have increased at an alarming rate in the last 40 years, according to a new report from Swiss Re Group, a wholesale reinsurance provider.
Annual flood insurance claims totaled between $1 billion and $2 billion in the 1970s, compared to $15 billion in 2011. Flooding impacts 500 million people every year, more than any other natural catastrophe, Swiss Re says. Recent losses from floods in Thailand, Australia and the Philippines rival damage done by hurricanes and earthquakes, yet awareness of flood risk and the impact of floods remains low.
Rising costs from floods are creating challenges for the insurance industry. Last year's $12 billion in insured losses in Thailand were 1,800 percent of the total amount of property insurance premiums paid in the country, Swiss Re's report says.
"This emphasizes the difficulties the industry faces in creating an economically viable approach to flood insurance," Jens Mehlhorn, head of flood at Swiss Re and co-author of the report, said in a press statement.
The flood report investigates ways of spreading the risk of flooding and the role insurers can play in advising communities on minimizing risk. Swiss Re developed a tool to identify "hot spots" where extreme losses can occur because of the location of global industries in flood-prone areas. Flooding in those areas not only causes damage locally; it also interrupts global supply chains and decreases manufacturing productivity internationally.
In conjunction with the report on flood risks, Swiss Re launched a flood application for iPads. The app features an interactive tool to examine hot-spot risk of 50 major cities around the globe.