Collaboration on Flood Risk Modelling: Enhancing Insurance Practices in South Africa

By: Tony Van Niekerk, Editor, COVER 

Flood risk has become a pressing concern for the insurance industry, particularly in the wake of devastating flooding events in South Africa.  

In a recent conversation with JBA Risk Re/Insurance Specialist Haydn Marchant and Althaf Rajab, Head of Core Operations at New National Assurance (NNAC), they discussed their collaboration on risk modelling for floods. The discussion shed light on the importance of flood risk assessment, the evolving role of insurers in managing this risk, and the tools and insights provided by JBA to better understand and underwrite flood risk. In this article I explore the key points raised during the conversation and highlights the significance of this collaboration for the insurance industry in South Africa. 

The Economic and Social Impact of Floods 

The conversation began with an acknowledgment of the significant impact of recent floods, particularly in the KwaZulu-Natal (KZN) region. Althaf highlighted the economic and social repercussions of these events, emphasising that the 2022 floods alone caused insurance-related damages exceeding 18-20 billion Rand. Furthermore, the loss of lives, damage to infrastructure, and disruption of daily life underscored the far-reaching consequences of flooding. The conversation emphasised the need to address flood risk not only from an economic perspective but also in terms of its social impact on affected communities. 

The Growing Importance of Flood Risk Assessment 

Haydn stressed the increasing demand for flood mapping, modelling, analytics, and consulting services in the insurance industry. JBA has witnessed a surge in inquiries, not only from the South African market but also from the London market, which underwrites South African risks. The conversation recognised that flooding is a global issue, with instances of severe flooding occurring in various parts of the world. Haydn noted that flood risk assessment has become a primary concern for insurers and that pricing for flood coverage is gaining prominence. 

The Changing Perception of Flood Risk in the Insurance Industry 

Althaf highlighted the evolving perception of flood risk within the insurance industry. Historically, floods were considered a secondary hazard compared to other perils such as fires. However, events like the 2017 floods in KZN and the recent 2022 floods have emphasised the need to reevaluate the significance of flood risk. With climate change contributing to more frequent and severe flooding events, relying solely on historical data is no longer sufficient. He stressed the importance of equipping insurers with additional tools and data to better understand and manage evolving flood risks. 

The Collaboration: Tools for Better Flood Risk Assessment 

The collaboration between JBA and NNAC aims to provide comprehensive tools for flood risk assessment. JBA’s system allows insurers and underwriters to access flood data, including flood maps, scoring, and pricing, down to individual risk address levels. This information enables a deeper understanding of flood risk, considering factors such as river flooding and surface water flooding. The collaboration includes NNAC brokers and binder holders, ensuring widespread access to the system and a collective effort in managing flood risk. 

Enhancing Insurance Practices and Socioeconomic Impact 

The collaboration between JBA and NNAC extends beyond pricing and risk assessment. It empowers insurers to engage with clients, both domestic and commercial, by sharing information on flood risk and its potential impact. This proactive approach enables clients to take necessary measures to mitigate flood risks and prepare for potential events.  This collaboration goes a long way in raising awareness and fostering proactive strategies to address flood risk. 

Conclusion – The collaboration between JBA and NNAC represents a significant step forward in flood risk modelling and assessment in South Africa. By leveraging JBA’s advanced tools and data, insurers can better understand and manage flood risks, enhancing underwriting practices and pricing accuracy. This collaboration not only benefits insurers and underwriters but also empowers brokers and clients to make informed decisions regarding flood risk mitigation. 

By taking a proactive approach to address flood risk, the insurance industry can contribute to the resilience and well-being of communities affected by floods.