KZN floods: how the insurance industry can better prepare for the next one

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The devastating floods that rocked KwaZulu-Natal (KZN) in April 2022 were some of the worst experienced in recent history. Over 450 people lost their lives, hundreds of homes were destroyed, and businesses experienced monstrous losses across the board. Small and medium-sized enterprises (SMEs) were the hardest hit because of insufficient insurance coverage and preparedness.

KZN has faced three destructive extreme weather events in the past few decades: a tropical cyclone in 1984, the 1987 floods, and serious coastal erosion from a storm swell in 2007. The harsh reality is that flood-based events in this province will happen again – it’s only a matter of when. The difference is, next time there’s no reason for communities and businesses not to be better prepared.

The insurance market uses predictive models to quantify risk and, therefore, insurance premiums. Being able to understand and quantify the risks underlying various dangers allows insureds and underwriters to more effectively prepare for destructive events that these dangers cause.

Volker Von Widdern, Principal of Strategic Risk at Riskonet Africa, has advised businesses to strengthen their risk strategies by optimising spend and ensuring they’re prepared for future crises that will undeniably crop up. Von Widdern explains, 

As infrastructural damage has been on the risk radar for some time now, and extreme weather events become more common, adapting your risk strategy has become more important than ever. 

He continues, “The reality is that infrastructure is immobile. Risk assessments should identify how to protect infrastructure/development from extreme rain, flash floods and rising water in the context of what is feasible.”

Using ground-breaking technology, it is entirely possible to model flood risk. JBA is a leader in computational flood modelling, offering probabilistic flood modelling worldwide. For every country around the world, it models – at 30m resolution – for river and surface water flooding, using state-of-the-art flood maps. This allows both non-insurance and insurance industries to manage and better understand flood risk and exposure at any location on a global scale. 

This technology, combined with increasingly available data on susceptibilities in the urban infrastructural system during flooding and the effect of flood waters on infrastructure, are powerful tools to help insurers prepare insureds for flood events, and therefore reduce losses. Von Widdern concludes, “It is essential for businesses to carefully assess and scrutinise their risk exposures in relation to extreme weather as historical conventions are no longer reliable. You can never be too prepared. Especially since these catastrophic events will only become more frequent.”

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