Report: Flood Risk Underestimated by People

Floods are the most commonly occurring natural catastrophes in the world and insurance companies are using science to better predict risks, yet most people underestimate its destructive power, German insurer Allianz said in a report.

Climate change and man-made causes, such as increasing agriculture and drainage restrictions, counted towards 182 cases of serious flood events in 2010, Allianz said.

“In 2010, the international disaster database EM-DAT counted roughly 400 natural catastrophes with at least 100 people affected or 10 deaths,” the October report said.

Nearly half of those catastrophes were floods, affecting 179 million people all over the world.

In January, floods that devastated the Australian state of Queensland amounted to $364 million in insurance claims, according to the Insurance Council of Australia.

“More and more natural drainage areas are being sealed off, for instance, by road-building,” said Markus Stowasser, Allianz SE Reinsurance. “On top of that, ever more housing developments are going on near rivers.”

Allianz urged fellow insurers to spread awareness on “the need for effective risk prevention”.

The average annual costs of insurance claims due to global natural disasters has soared to over $40 billion from barely $5 billion in the last 40 years, the report said.

“Simulations have shown that in Germany, insurance claims are likely to double by the end of the century,” Allianz said.

Allianz, Europe’s second biggest insurer, was the first to sell a $150 million catastrophe bond in 2007 in Britain to cover against flood and earthquake risks.

(Reporting by Sarah Mortimer; Editing by Kavita Chandran)