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Awareness of flood risks remains low: Swiss Re report

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Awareness of flood risks remains low: Swiss Re report

No other natural catastrophe affects as many people as flooding, but awareness of flood risks and their impact remains relatively low, according to a report released Thursday by Swiss Re Ltd.

The report, “Flood — An Underestimated Risk: Inspect, Inform, Insure,” says that insured flood losses have increased significantly in recent decades, amounting to $15 billion in 2011. The report says that population growth, higher concentrations of assets in exposed areas and climate change are among the factors contributing to the increased cost of flooding.

It adds that one of the most important lessons learned from the Thailand floods of 2011 is the identification of “hot spots” or clusters of globally relevant industries in flood-prone regions. These areas can cause “extreme losses because claims are not only incurred locally, but through interruptions to supply chains and decreased manufacturing productivity, internationally.”

“With a good insurance cover, however, flooding does not have to turn into a disaster — at least not financially,” according to the report. But flood insurance often is not widely available or affordable, “despite the fact that there is no reason for this as long as the basic principles of insurance are met.”

“What is important is that all participants have to play their part and contribute to a sustainable solution,” according to the report. As a result, the government has to set the rules and guidelines for insurance and actively promote mitigation measures such as building codes, the report says.

“What matters is that the insurance sector can only offer flood protection when it can draw on a sufficiently large risk community,” says the report. “Besides risk-adequate premiums, compulsory schemes or — when not mandated by law — a bundled system based on a wider risk portfolio can come a long way in making flood insurance economically viable and more widespread.”

The report is available here.