Diverse Data Sources Revolutionize Flood Insurance Underwriting

Flood risk is one of the most complex and destructive perils for property owners and insurers alike. Historically, the private market avoided covering flood risk, leading to the creation of the National Flood Insurance Program (NFIP). However, advancements in data collection and computing power have reshaped the landscape for flood insurance, turning it into a growing opportunity for private insurers.

Anil Vasagiri, senior vice president for property solutions at Swiss Re, highlighted these developments in a recent Executive Exchange with Triple-I CEO Sean Kevelighan. Vasagiri explained that utilizing multiple data sources to understand specific flood conditions allows insurers to more accurately underwrite flood risk and help policyholders manage their exposure. This increased information capacity has led to more private insurers entering the flood insurance market since 2016.

This shift is timely, coinciding with the implementation of NFIP’s Risk Rating 2.0. This new pricing methodology aims to align premium rates more closely with individual properties’ flood risks, making them more actuarially sound and equitable. As a result, some policyholders may see reduced premiums, while others may experience increases.

Vasagiri also discussed Swiss Re’s acquisition of Fathom, a company specializing in water-related risks, emphasizing the ongoing commitment to closing the flood protection gap and enhancing the accuracy and availability of flood insurance coverage.