European flood risk evolving, claims new Gallagher Re paper
Gallagher Re has published a new white paper, A Risk in Flux: Exploring Europe's Changing Flood Reality for Insurers, examining how flood risk is evolving across Europe and why insurers may need to look beyond traditional flood hotspots to understand emerging sources of loss.
The paper's findings were derived from analysis of KatRisk's high-resolution flood hazard and flood defence datasets and Gallagher Re's Europe Flood Model, which captures both fluvial (river) and pluvial (rainfall-driven) flooding across Europe.
The analysis highlights a growing disconnect between where flood losses have historically occurred and where future losses may emerge, helping insurers identify new concentrations of exposure, assess portfolio risk and make more informed underwriting, reinsurance and capital allocation decisions.
The research finds that while investments in flood defences and resilience measures have helped reduce losses in many historically flood-prone urban centres, flood risk is becoming increasingly dispersed. As exposure continues to grow, insurers are facing greater loss potential from rainfall-driven flooding affecting smaller catchments, suburban developments and communities outside major river corridors.
Dave Egan, Head of International Property Practice at Gallagher Re, said: "For many years, the industry's understanding of European flood risk has been shaped by experience of major river flood events. While those risks remain important, today's loss landscape is increasingly being influenced by rainfall-driven flooding affecting smaller communities and catchments beyond traditional flood zones.
“As exposure continues to grow across Europe, insurers need a more forward-looking view of flood risk that goes beyond historical loss experience. By combining KatRisk's advanced flood hazard science with Gallagher Re's market expertise and understanding of flood accumulations, our Europe Flood Model helps clients better identify emerging concentrations of risk and make more informed underwriting, reinsurance and capital management decisions."
Martyn Sutton, General Manager at KatRisk, said: “Flood risk extends well beyond established hotspots. High-resolution, physically based modelling reveals how rainfall-driven flooding, smaller catchments and local flood defenses can significantly influence exposure. By bringing together KatRisk’s detailed hazard and defense data with Gallagher Re’s market expertise, this analysis gives insurers a clearer understanding of potential accumulations, helping them reassess assumptions and make more informed underwriting and portfolio decisions.”
Among the trends highlighted in the paper is the growing importance of rainfall-driven flooding. Analysis from the German Insurance Association (GDV) (Table 2) shows that, of the country’s 37 largest flood-related insurance events recorded since 2002, 32 events (86%) were classified primarily as heavy rainfall/flash flooding pluvial events, compared with only five events primarily driven by river flooding. These events accounted for 58% of the insured losses recorded from flooding.
Storm Bernd in 2021 provides a clear example of this shift. Despite primarily impacting relatively small river catchments and communities with populations of fewer than 50,000 residents, the event generated more than EUR10 billion of indexed insured losses, becoming the costliest flood event in modern German insurance history.
The paper also explores the impact of flood defences on insured losses. Gallagher Re's analysis of Storm Boris found that existing flood defence infrastructure reduced losses by up to 50%, while the event ultimately generated approximately EUR3 billion less insured loss than the 2002 Central European floods on an inflation-adjusted basis. The findings demonstrate the significant value of resilience investments and flood protection measures in shaping loss outcomes.
The report concludes that as Europe's flood landscape continues to evolve, insurers require increasingly sophisticated analytics to understand how hazard, exposure, vulnerability and flood protection measures interact across their portfolios. By incorporating detailed flood defence information and high-resolution hazard data, the Europe Flood Model provides a more comprehensive view of flood risk across the region and helps insurers identify emerging accumulations that may not be apparent from historical loss experience alone.
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