Recent hurricanes Helene and Milton poured trillions of gallons of rainwater across multiple states, causing catastrophic flooding. But the problem of increasingly elevated flood risk isn’t unique to the U.S.
Changing weather patterns, population movement, and other factors affecting inland and coastal waters expose 3 in 10 people worldwide to significant flood risk, according to a recent report from data and insights company Moody’s. North America’s population faces comparatively low risk among global regions; Southeast Asia and the Middle East experience the most flood risk over 10-, 30-, 50-, and 200-year periods.
Moody’s report, though, didn’t analyze flood risk to properties — only to populations.
“North America’s population exposed to 10-year coastal flood events is remarkably low,” the report reads. “This should however not be confused with property at risk, where in some regions the population exposed to frequent coastal flooding is low but the proportion of high-value homes being affected leads to more headline news.”
What causes flooding that leads to costly insured losses?
Thunderstorms or severe convective storms mainly occurring in the U.S. accounted for 70% of global insured losses in the first half of 2024, according to the Swiss Re Institute. Strong winds characterize these storms, which often include tornadoes, hail, and heavy rain. Those conditions, in turn, can cause storm surges and overflowing waterways.
In just the first half of 2024, these storms led to $42 billion of global insured losses, according to Swiss Re. Twelve U.S. storms led to $1 billion or more each in insured losses, accounting for around 30% or more of global losses.
“Insured losses from severe thunderstorms have been growing due to a mix of factors including inflation, which has contributed to rising construction costs,” said Jérôme Jean Haegeli, group chief economist for Swiss Re, in a release. “And, with economic development, overall exposures will continue to increase. That’s why investing in protective measures — such as shielding vulnerable communities from floods or improving building codes to protect homes from severe hailstorms — is vital.”
Floods specifically caused above-average losses, and events in the United Arab Emirates, Germany, and Brazil accounted for 14% of losses, Swiss Re reported. Torrential rain causing flash floods in the Arabian Peninsula led to at least $2 billion of insured losses in the UAE alone.
As in Moody’s report, Swiss Re noted severe weather isn’t the only factor.
“While heavy rainfall is expected to increase in a warmer climate, swift urban growth, land use alteration, scarce drainage systems, and dry soils intensify loss severity,” reads an August release.
What’s next: How losses affect U.S. insurance costs
Since homeowners insurance policies don’t cover flood damage, the financial burden of insured flood losses falls on the Federal Emergency Management Administration’s National Flood Insurance Program or private flood insurers. Many homeowners also go without flood coverage, shouldering that burden themselves.
As Haegeli suggests, more factors than severe weather affect the cost of insured losses. Severe storms also cause more damage than just flooding. These climate catastrophes affect home and car insurance rates in numerous states, especially when legal system abuse and inflation exacerbate claims costs, according to Insurify analysis.
Florida, Louisiana, and Oklahoma have the highest home insurance rates in the U.S., according to Insurify’s home insurance report, and all experience significant weather-related losses largely from hurricanes and tornadoes.
The increased incidence of flooding also affects car insurance rates, since the comprehensive coverage portion of a full-coverage auto insurance policy covers flood damage. In August, Insurify identified North Carolina as a state where car insurance rates are rising fastest, largely due to flood damage. The recent Hurricane Helene underscores that risk.
“As we experience tornadoes, hail, and flooding in places where they weren’t necessarily a major threat before, the increased frequency and severity of these events will need to be considered in pricing,” Betsy Stella, vice president of carrier management and operations at Insurify, said in Insurify’s car insurance report.
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