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Flood Risk Review and Analysis
Flood Presents Unique Risk for Enterprises
Flood accounts for significant property and business interruption losses affecting thousands of enterprises each year. Damaging flood events can develop from prolonged frontal weather systems affecting small local areas, or from tropical storm and hurricane events affecting the coastline and inland regions of exposed coastlines. Flood damages can be difficult to predict and are heavily influenced by local terrain and urbanized developments. This phenomenon is a dynamic one and past history does not necessarily predict future event outcomes.
(Left)Extensive flooding in New Orleans from Hurricane Katrina. (Right) Flooding created significant damage to commercial downtown Grand Forks in 1997.
Enterprises are especially at risk to business interruption losses due to the difficulty in not only quantifying the underlying hazard source creating the impact, but also the uncertainty in identifying the "system" and infrastructure impacts that can occur during and following a flooding event. Many businesses are dependent upon supply chains to provide raw materials and finished goods to manufacturers, distributors and retailers, and are highly exposed to major events that impact a region’s infrastructure and its ability to move goods and products through the supply chain network including roadways, bridges, rail, waterway, ports, etc. Losses that emanate from these interruptions are typically contingent losses for which traditional risk transfer protection can be woefully inadequate, or difficult to obtain.
While flood insurance may be available in the commercial insurance markets or through the NFIP (National Flood Insurance Program), it is difficult for many businesses to estimate the extent of coverage required, what type of deductibles and/or determine an optimal sub-limit to carry to adequately provide protection for one or more of their asset locations.
Solutions for Flood-Exposed Businesses
ABS Consulting provides a comprehensive array of services focused on the corporate market regarding flood risk including:
- On-site flood risk assessment of individual facilities and assets
- On-site flood risk evaluation and mitigation opportunities
- Probabilistic modeling to calculate physical damage to business interruption exposure
- Evaluating risk transfer and mitigation options for flood risk
- Portfolio analysis to assess flood risk from extreme events and supply chain impacts
ABS Consulting is known for its initial and continued efforts in developing the HAZUS Loss Estimation Flood Model used by FEMA in evaluating physical damage and economic loss from the results of the hazard analysis through flood hazard analysis and flood loss estimation analysis modules. The hazard analysis module uses characteristics such as frequency, discharge, and ground elevation to estimate flood depth, flood elevation, and flow velocity. The loss estimation module calculates physical damage and economic loss from the results of the hazard analysis.
ABS Consulting, through EQECAT, has developed detailed technical flood models to assist clients in assessing and quantifying the risk from flood. Our US Flood model supports the ability to calculate the risk posed to individual location assets from riverine and coastal flooding events, including those created from storm surge from tropical systems affecting the United States coastline. The model(s) support desktop and field evaluation efforts, and provides estimated damage to structures and assets on an annualized basis as well as annual aggregate damages. Additionally, the model(s) provide estimated water levels at each site at varying annual probabilities of occurrence, and can be used by ABS Consulting consultants to estimate the benefit/impact of varying flood defenses and mitigation approaches.
U.S. Flood Analysis Software
ABS Consulting can also assist clients with exposed assets in the United Kingdom, in Germany for the Rhein, Danube, Elbe, Oder , Weser, Ems basins, tributaries and minor rivers, and for the Danube basin in Austria.
EQECAT's EuroFlood supports both individual location and portfolio asset analysis for providing probabilistic annual mean loss, loss exceedance curves, historical and scenario results - per country, river basin, Cresta zone and postcode level resolution. These results can be differentiated by line of business, type of insurance coverage, etc. The software also supports mapping of results.
EuroFlood Analysis Software
When integrated with our Supply Chain Risk Simulation (SCRS) capability, ABS Consulting can quantify the impact from contingent business interruption losses to your firm or enterprise’s supply chain using varying financial loss metrics which support the transfer of risk into the insurance or capital markets. SCRS supports probabilistic and scenario loss events to provide annual costs and worst-case type loss evaluations.
Using our engineering, technical and modeling expertise, ABS Consulting can provide clients with a quantified view of risk from a wide range of possible scenarios, and convert those into optimal strategies for protecting the firm's assets using a combination of risk transfer, mitigation/retrofit, and alternative risk programs (i.e. securitization), in light of market conditions present. These are highly respected capabilities that are readily accessible to support clients focused on truly understanding their exposure and in making informed, financial decisions to manage their risk.
For more information, contact:
Kenneth A. Travers
SVP, ABS Consulting/EQECAT
1-302-239-1145 | ktravers@eqecat.com |
