During a panel discussion on “Modelling the NatCat Storm” at the 2025 Insurtech Insights Europe conference, specialists from across the re/insurance market discussed the critical intersection of nat-cat modelling, climate change, resilience strategies, and post-disaster recovery efforts in the insurance industry.
Moderator Jeremy Brown, head of climate strategies and investments at Anthemis highlighted the challenge presented by the reactive approach taken by much of the insurance industry when it comes to dealing with natural disasters in a changing climate. Is there a more proactive way to make insureds take up resilience measures more effectively, he asked, and if there is, why don’t insurance companies want to do it?
Joe Norris, head of UK catastrophe analytics for Aon, highlighted how UK floods are an example of a climate peril that, if you evaluate the climate models through a cat model lens, is trending in one direction – up, mainly from a frequency perspective.
“If you look at the cat models, none of the cat models currently look at adaptation as part of them,” Norris said. “Without adaption, it’s quite clear that flood is going to only get kind of worse. And who's going to pay for that? It’s going to be both from an economic perspective, but also an insurance value chain perspective as well.”
Highlighting some of the existing schemes that already exist, he looked at how the “Build Back Better” scheme allows participants to reinstate their property to a better level of resilience after a flood occurs. Looking back to a study Aon did last summer, he noted that the re/insurance broking giant got about 80% of the UK insurance industry together to look at recreating the 2007 flood which impacted the Hull and Gloucestershire regions and was the largest flood on record for a long time.
“When going into the real details about it, what it highlighted to us was that, okay, nationwide flood defences have improved across the UK, and specifically on the 2007 footprint,” Norris said. “However, I think there's only about 16% benefit they were given. And the outline headline I kind of got from this study was saying that there's a real over-reliance currently in the market on Flood Re.
“With Flood Re set to transition out of the market by 2039, we need to take a more proactive approach to dealing with climate change. So that's where I’m calling on the industry leaders here, really, because we are the experts in risk, and it's for us to try and find the solution and to be proactive.”
These proactive measures include property flood resilience (PFR) measures including non-return air breaks, flood barriers, in-house air pumps or sustainable drainage systems (SuDS). Often these measures are considered a last resort measure when it comes to flooding because it means engaging at the property level, Norris said, but from his perspective, these measures are a real and tangible way to quantify the benefit of where insurance players have exercised proactivity to make a difference to their insureds.
As to why some insurance companies aren’t getting involved in this space, he emphasized the question mark over who will pay for these measures. “So, you look at the insured, they don't want to pay £1,000 for a pump to get a £20 reduction on their premium, the cost benefit is probably not there.
“For the insurance company, they’re interested in going for it, but what happens in year two? That’s what we call year two problems – where the next year, the insured might go to another company and therefore you’re not getting that return on investment by putting the pump into that policyholders’ property.”
When it comes to the reinsurance level, he noted that often the reinsurer is just too detached from the risk because they look at these risks from a portfolio basis not an individual risk basis. As to how to address that, he said, he noted that the first solution is being able to quantify this risk using cat models. However, it’s important to note that on the modelling side of things, the industry is in its infancy here.
“There are ways in which it can look at property flood resilience and take them into account at the property level, but not all the different techniques.” For example, he said, there are ways in the capitals where you can adjust the vulnerability curves to reflect conditions. He looked at work being done by Middlesex University to update its Handbook to look at different types of PFR. “Once that’s complete, then we’d like to see that work being pushed into all the different cat models which will then allow us to properly quantify these benefits and, as a result, hopefully allow us to be more proactive.”
