Flood Risk Assessment Product Launches To Mortgage Market

Flooded Street
A UK environmental consultancy has launched a new product aimed at enabling insurers, risk managers and mortgage lenders to assess flood risk accurately.

GeoSmart Information‘s FloodSmart Analytics program provides the means of calculating flood depths and probability, as well as the costs of flooding from river, coastline, surface water and groundwater sources, including the impact of climate change.

The company says the software will allow organisations in the financial services and insurance sectors to establish precisely the level of risk for buildings, resulting in improved decision-making in the field of risk management.

Phillip Martin, head of FloodSmart Analytics, brings more than 30 years’ expertise in insurance, reinsurance and finance to GeoSmart Information, itself a specialist in flood risk, drainage, groundwater and contaminated land.

He believes extreme weather events caused by the climate emergency have highlighted an important imbalance between the long-term nature of lending on property and the short-term nature of risk transfer through insurance, typically taken one year at a time.

Historical experience, Martin says, which is substantially relied on currently, can no longer be a sufficient data set for use in statistical methods. The use of inferior data will lead to poor decision-making by insurers, mortgage lenders and risk analysts. Therefore, it is sensible to use the best available data.

Insurance needs to be appropriate and adequate

FloodSmart Analytics has been developed to enable property buyers and their lenders and insurers to demonstrate the flood risk to a single property or a whole portfolio of buildings so that decisions can be made as to the type of insurance cover that is required.

There is little point, he adds, in a consumer using a cheaper insurance broker only to discover the specific cover they need has been excluded. Using this model, everyone can make informed decisions.

Martin believes FloodSmart Analytics will be a game changer because it will not only identify the discrepancy between a property and its insurance cover but will also assist the financial institutions to work with the property owner to ensure the insurance is appropriate and adequate.

Climate change, he says, is a long-term issue in which risk financing and risk transfer processes will need a common language to develop or update financial products, the reason why FloodSmart Analytics is a groundbreaking development.

As the program is scalable from one single building unit or smaller to very large portfolios, there is no loss of analytical function because the detail is never lost.

This means individual lending or insuring decisions can be tracked all the way to the risk management function and capital allocation decisions.

100,000 cliff-top properties could be at risk

The UK Climate Projections 2018 study is the most up-to-date assessment of how the UK may change over this century. Apparently, the 2018 heatwave is set to become the norm while winter rainfall will increase by more than a third.

The Report was launched on the 10th anniversary of the UK’s Climate Change Act. This ground-breaking strategy, committing the country to cutting greenhouse gas emissions by 80pc by 2050, shows the UK currently well ahead of many other nations in curbing carbon emissions.

The Met Office has said that a general increase of at least 1m in sea level is almost certain. Sea levels in the Thames Estuary could raise flood tides by up to1.15m by 2100, if greenhouse gases continue unchecked. The report says many coastal communities are especially vulnerable to flood risk because populations in these areas are often older and poorer than the UK average.

The issue of land-slips on the coast is highlighted. 100,000 cliff-top properties could be at risk from coastal landslides, but the public lacks clear and accurate information about the issues and there is no insurance or compensation for people who lose their homes.

Transport, energy and waste infrastructure are also exposed to coastal flood risk and erosion. Miles of road, railway line, acres of good farm land and potentially toxic historic landfill sites are currently at greater risk of coastal flooding in any given year.

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