Lloyd's has issued a flood risk analysis of California's Central Valley, which is home to 6.9 million people and $1 trillion of insurable assets. Although the Central Valley and much of California remain in the throes of a multi-year drought, record rainfall in July is a reminder that flooding remains a significant natural peril in the region.
The report, written in partnership with JBA Consulting, an environmental and engineering consultancy, estimates the potential exposure at risk for a 1-in-100-year flood in the Central Valley region of California by analyzing exposure data against a global flood map. Experts predict the implications of such a catastrophe, excluding demand surge or business interruption losses, could potentially result in $24.1 billion of damage to floodplain assets.
Despite extensive infrastructure in place, the report finds that existing flood control structures have a standard of protection less than the 1-in-100-year flood and are likely to be eroded by climate change. Additionally, population expansion increases the pressure for urban development on protected flood plans.
“The report highlights that the Central Valley's exposure to flooding is high and likely to increase,” said Hank Watkins, the president of Lloyd's America. “We hope our report will maintain awareness among businesses and communities, as well as the insurance industry, of flood risk in the region. Ultimately, more sophisticated catastrophe modeling needs to be developed for the Central Valley in order to better understand and mitigate the potential losses that could result from extreme flood events.”
Lloyd's said that the analysis in the report was intended to help insurers achieve more accurate risk-based pricing to ensure claims can be paid and to promote responsible risk management. In combination with advanced modeling and forward-looking analysis, the private reinsurance sector can play a major role in sustainable flood resilience, Lloyd's said.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].