A service to help insurers understand the financial impacts of changing flood risk in Europe, based on PESETA IV

The European Union PESETA IV project has produced a comprehensive data-set that quantifies the impact of climate change on river flooding and damage in Europe. This data potentially has significant application in the insurance industry, but requires some steps of post-processing before it can be used in practice. We propose a post-processing approach based on statistical modelling of the simulated changes in damage so that they can be used to calculate the change in damage between any two time-periods and applied to any global mean surface temperature (GMST) scenario. We find that a log-linear model of the damage versus GMST works well for the limited range of GMST changes required for insurance risk modelling. We evaluate the rate of change of damage due to climate change at NUTS2 resolution, and calculate the correlation matrix between changes in different locations. This allows us to simulate spatially correlated damage scenarios at NUTS2 resolution. We describe how, under certain assumptions, these scenarios can be used to adjust many of the metrics of flood risk used in the insurance industry, such as average annual losses, exceedance probabilities and year loss tables. Many sources of uncertainty affect our results, from uncertainty related to the underlying climate, hydrological and damage models, to uncertainties in our statistical methodology. Nonetheless, the results give a good indication of the sign and rough magnitude of the likely changes in river flood damage due to climate change.

JEWSON Stephen;  MAYNARD Trevor;  DOTTORI Francesco; 

2023-05-30

ELSEVIER

JRC130478

2405-8807 (online),   

https://www.sciencedirect.com/science/article/pii/S2405880723000560?via%3Dihub,    https://publications.jrc.ec.europa.eu/repository/handle/JRC130478,   

10.1016/j.cliser.2023.100395 (online),