It’s windy when it’s wet why UK insurers may need to reassess their modelling assumptions

Giorgis Hadzilacos, Ryan Li, Paul Harrington, Shane Latchman, John Hillier, Richard Dixon, Charlie New, Alex Alabaster and Tanya Tsapko

The 2015/16 storms caused the most extreme flooding on record, with parts of the UK impacted by heavy precipitation and extreme wind over a four-month period. These extreme weather events occurred in quick succession, hindering relief efforts and accruing £1.3 billion in insured losses. Without adequate mitigation, such events may result in claims handling strain and capital risk for insurers. Recent research finds that above-average windstorm seasons are typically accompanied by above-average inland flooding. That raises a challenge for insurers: should they have adequate risk mitigation measures in place for periods that are both windy and wet? We argue that insurers need to reassess their model assumptions, especially as climate change might make wet years more frequent than in the past.

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