Media release 19 December 2024
REVOLUTIONARY TECH SOLUTION TACKLES AUSTRALIA’S COSTLIEST NATURAL HAZARD – FLOODS
Floods are among the most frequent and costliest natural disasters, costing Australia’s economy millions each year and posing significant challenges for businesses and communities.
This year, the Insurance Council of Australia (ICA) reported the impact of extreme weather on the Australian economy had more than tripled over the last three decades. In the last five years alone, the average annual cost of extreme weather claims had more than doubled to $4.5 billion, driven largely by the growing cost of flood.
Climate change and urbanisation are intensifying flood risk and potential losses, with it becoming near impossible to predict which areas will be inundated in the next rain event.
“Australia has built many assets over the years in floodplains which has led to serious economic and insurance events in recent years,” Lynn Roehrig, Descartes Head of Business Development (Australia and New Zealand), said.
Flood acts unpredictably, influenced by topography, flood source, local infrastructure and change in climate leading to highly variable outcomes during these events and therefore frequently results in underinsurance.
This was one of the key issues following the 2011 Queensland floods, where insurance policies came under scrutiny over the coverage of different types of flooding – pluvial and fluvial.
Pluvial flooding occurs in urban areas and is characterised by extreme rainfall and the location’s inability to absorb the water any longer, leading to flash flooding. Fluvial flooding occurs when rivers overflow their banks due to prolonged rainfall.
Over the past decade, Queensland and northern New South Wales have been majorly impacted, with an increasing number of communities across each state being declared flood prone. In Queensland, flood risk exists along the length of the east coast, with areas from Cairns to Brisbane inundated in extreme rain events. It’s a similar story over the border in New South Wales, with communities impacted from north in the Tweed to Wollongong in the south.
“It's a lot easier to predict fires through risk management behaviours and practices, but with flood or tropical cyclone it's just Mother Nature – you can't control it,” Lynn said.
“As a result, when you don't understand something in terms of underwriting a risk, you either exclude it or restrict it (with sub-limit or deductible) or you price over the odds because you don't fully appreciate the risk.”
Descartes’ innovative Parametric Flood-at-Location Solution uses on-site sensors to precisely assess and measure flood risk in real-time, facilitating swift indemnification in case of a flood event.
This year, Descartes installed a “Flood-at-Location” Solution for an industrial risk located in southeast Queensland which suffered multiple extreme losses in recent years. Following those events, they had undertaken various mitigation works to increase their resilience but could not get rid of all the risk given the highly exposed site location.
“They have undertaken works from an engineering perspective to reduce the flood risk and partnered with Descartes to cover the remaining portion of the risk,” Lynn said.
“What we've done is we've collaborated with the client, their broker and their engineers to assess the financial losses related to a flood event whose water height exceeds pre-agreed levels.”
“As a result, we're really tailor-making this product to speak to their true exposure on the ground.”
A flood radar sensor was installed onsite to measure agreed water heights, giving the client access to data so they can monitor flood levels themselves. Given the extreme nature of flooding, particular attention is paid to the robustness of the sensor technology, ensuring measurements even in the most extreme scenarios.
“They can set up warnings to come in and move critical equipment out of the way, if need be, so it also becomes a risk management tool,” Lynn said.
“Our product tries to simplify things so that if particular metrics are met – such as how many millimetres of rain fell over a certain period, or the river gauge or flood sensor reaches a particular level – then we’ll pay the agreed amount.”
About us:
ABOUT DESCARTES
Descartes is a global corporate insurer that collaborates with brokers to protect their corporate and public sector clients against climate, cyber and other emerging risks. At the forefront of AI and Data analysis, Descartes utilises cutting-edge technology combined with a new generation of data sources, to model, assess and manage risks.
Offering a full range of insurance products, including cost-effective and fully transparent parametric solutions with predefined and swift claims payouts, Descartes has already provided over $10 billion capacity to its clients through corporate brokers.
With a global footprint, Descartes serves a diverse portfolio of clients in more than 60 countries, with 18 offices spread across Europe, Asia-Pacific, Latin and North America.
The Descartes group comprises Descartes Insurance, a full-stack insurer operating in several European countries, and Descartes Underwriting, a global MGA backed by a panel of tier-one risk carriers. The company has been financed with over $141M by investors including Highland Europe, BlackFin, Serena, Cathay and Eurazeo. descartesunderwriting.com
Contact details:
MEDIA CONTACTS
Brisbane: Deb Eccleston – Descartes Communications Correspondent
0422 407 788
Paris: Eric Allombert – Descartespressrelations@descartesunderwriting.com
(+33) 6 89 91 53 73
