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Flood Data and Location Intelligence

Leveraging Flood Analysis to Mitigate Risk

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Condo popularity is on the rise and for those financing the properties, whether it be a reputable financial institution or the bank of mom and Dad, is your investment protected? What happens in the event of a flood and are you asking all of the right questions before investing? For example, are you investing in properties that are a high risk to flood? With help from DMTI, we’re able to take a closer look on a few regions to understand your exposure.

What risk does flood pose in Canada?

Floods are the most frequently occurring natural hazard in Canada. According to the Institute for Catastrophic Loss Reduction (ICLR), the Canadian Disaster Database indicates that 241 flood disasters have occurred in Canada between the years 1900 and 2005, almost five times as many as the next most common disaster (wildfire). Over the past few decades, urban flooding has been a growing problem, resulting in more than $20 billion in flood damage between 2003 and 2012, according to the federal government.

What is the risk of flood peril to condos in Canada?

In order to provide answers to this question, a condominium database for Canada was created by Teranet and DMTI Spatial combined with flood hazard maps highlighting areas that could be impacted by river flood (where the water rises over its banks), surface water (where water will pool due to elevation differences) and storm surge (coastal flooding). Three key markets were focused on as part of this analysis: Toronto, Vancouver and Montreal.

Toronto, ON

The flood risk analysis (using 1/100 year return period) for Toronto revealed that approx. 1.2% of all condo buildings may be impacted by river flood risk and approx. 5.9% of all condo buildings may be impacted by surface water flood risk.

Toronto

Toronto

Figure #1: Toronto, Ontario – Condos falling within the river flood hazard map for the 1/100 year return period.

Vancouver, BC

The flood risk analysis (using the 1/100 year return period) in Vancouver revealed that approx. 7.3% of all condo buildings may be impacted by surface water risk and approx. 3.2% of all condo buildings may be impacted by storm surge flood risk

Figure 2: Vancouver, British Columbia – Condos falling within the surface water hazard map for the 1/100 year return period

Montreal, QC

The flood analysis (using the 1/100 year return period) in Toronto revealed that approx. 15.0% of all condo buildings may be impacted by river flood risk and approx. 11.4% of all condo buildings may be impacted by surface water flood risk.

Figure 3: Montreal, Quebec – Condos falling within the surface water hazard map for the 1/100 year return period

What does this mean to my business?

As per the Insurance Bureau of Canada (IBC) for flood perils, 20% of Canadian households could be qualified as high risk, and about 10% of those would be considered very high risk which equates to about 1.8 million households. Understanding the impact of natural disasters such as catastrophic flooding is a complex issue. Many customers are challenged with identifying and mitigating their total risk and exposure within their existing portfolio. Here are some additional areas for consideration that would benefit from this type of analysis:

  • Risk Mitigation: Enhance real-time mortgage adjudication processes, speed time to decision and reduce manual intervention with enhanced insight into the precise location of the property as it relates to a flood zone.
  • Risk Analysis: Validate capital adequacy requirements and better understand and reduce exposure by being able to assess the total accumulated risk to a portfolio as it relates to proximity within flood plains.
  • Site Planning: Enhance infrastructure and site planning analysis by understanding the potential risk of flood before deployment.

The analysis conducted by DMTI Spatial using its platform Location Hub supports real-time flood risk analysis, portfolio accumulation risk analysis and the real-time visualization of the potential exposure to flood zones. This provides key data of importance to better forecast exposure and mitigate risk.

Contact us to learn more

Underwriters DMTI Spatial CanMap Canadian GIS Data

Top 3 Ways Location Intelligence Empowers Underwriters

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Today, modern location intelligence solutions are transforming the underwriting process. They give front line underwriters the ability to quickly and intuitively understand the exposures associated with one address – or an entire portfolio. Geospatial analysis has evolved from a back-office, ‘after the-fact’ function to a leading role in real-time underwriting decisions. Below are the top 3 ways Location Intelligence empowers Underwriting.

1) Individual Risk Assessment and Pricing 

True location intelligence solutions allows underwriters to more accurately assess risk at the individual property level, resulting in higher quality underwriting, more profitable business and cost savings through reduced claims.

Proper risk assessment starts at the point of sale. In the case of personal and commercial properties, that involves the validation and cleansing of addresses. Location intelligence solutions allow insurers to quickly validate the accuracy of new addresses or addresses currently on file for existing policyholders.

2) Risk Accumulation and Portfolio Management 

Accumulation or concentration of risk is an ongoing concern for insurance companies. An accumulation of risk occurs when a portfolio of business contains a concentration of risks that might give rise to exceptionally large losses from a single event. Such an accumulation might occur by location (property insurance) or occupation (employers’ liability insurance), for example.

Insurance underwriters require real-time visibility into their policy accumulations, perils risk data and claims history across their book of business. With an aggregated view of risk (perils and accumulations), underwriters can better manage their overall exposure across their entire portfolio.

Location intelligence solutions offer an accumulation and perils management tool to analyze various risk levels against individual addresses, street levels and postal codes to produce hazard ratings. This means underwriters can make decisions using up to-date data, such as flood or earthquake risk, contaminated land or proximity to potential risk sites, such as gas or propane storage facilities

3)  Segmentation 

A powerful result of location intelligence technology for underwriters is segmentation. Instead of looking at risks on a “blanket” basis, they have new tools to slice individual exposures by specific rooftop locations. In the example of a flood-prone region, insurers can identify which specific properties are at risk, instead of relying on broad postal code or FSA boundaries.

By assessing risk at the property level, insurers have the ability to underwrite business they may have previously declined, based on an inaccurate assessment of the risk location. With a better understanding of geographical risk (peril and accumulations) insurers can be more aggressive with rates in low-risk areas. Underwriters can identify under-exposed areas and target those areas with marketing efforts and competitive premium. Using a location intelligence capability, the insurer can hone in on a given region’s hot and cold spots

Conclusion 

Location-based technology has become an invaluable strategic tool to many leading insurers. Precise mapping and geocoding allow underwriters to quickly access information, recognize patterns and drill down into data for detailed analysis and sound decision-making. The real danger for those carriers not adopting location intelligence is adverse selection – the writing of poor risks without accurate or detailed information.

Understanding where a property is in relation to risk elements is a key decision affecting an insurance carrier’s profitability. Using location intelligence is a simple solution to a complex, real-world problem for the insurance industry. Insurers depend on geographic and demographic information to assess underwriting risk, develop appropriate pricing models, match coverage, expand markets, serve existing customers and develop new or niche business

To learn more download our Property & Casualty Insurance: Getting Risk Right White Paper

Calgary Flood

Calgary Flood – 2 years later. Where are we now?

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It has been 2 years since the 2013 Calgary floods that occurred in Southern and Central Alberta.  What’s changed?

Overland Flood Insurance Availability

In 2014, Canada’s Economic Action Plan noted that “Canada is the only G-8 country without residential flood insurance coverage, leaving many Canadian homeowners with inadequate protection against losses from overland flood events.”

In 2015, Canadian insurance providers began offering overland water protection for residential property owner across Canada.

Aviva Canada was the first to introduce this change to the market followed shortly after by The Co-operators with Alberta being the immediate focus and other subsequent provinces to be rolled out over time.

 A better understanding of flood risk

According to the Canadian Underwriter:

Flooding is the most common type of natural disaster in Canada and the flood in southern Alberta in 2013 was the most costly storm in Canadian history. “In general,” overland flooding is not currently covered on home insurance policies, the Insurance Bureau of Canada said recently on its website.

A number of vendors have begun to offer hazard maps that help companies determine

The first vendor to market was JBA Risk Management and in May 2015 Aon Benfield began offering this type of data to Canadian insurance companies.

A better understanding of portfolio risk

As the usage of flood hazard maps increases, they will also seek detailed property location information to ensure that they understand where current and new customers are located in reference to these boundaries.

Insurance companies typically utilize three (3) different boundaries from the first three digits of the postal code to the address when analyzing flood risk:

Boundaries Number of unique records in Canada 2015
Forward Sortation Areas (FSA) 1.6K
Postal Codes (FSA LDU) 857K
Addresses 15M

Address level accuracy should be considered when mapping (geocoding) your portfolio against flood hazard boundaries versus the use of postal codes to better understand risk.  Using postal codes without understanding how many individual properties are associated to it in relation an event boundary may lead to the stigmatization of that entire postal code even though only a few addresses may be impacted.

Below is an example for the municipality of Black Diamond, Alberta which has one postal code (T0L0H0) and over 1,000 addresses associated with it. The blue boundary represents the flood boundary from the Alberta 2013 floods.

data visualization tools

The map below depicts the same area where the blue boundary represents the flood boundary from the Alberta 2013 floods:

data visualization tools

Data maintenance is essential to ensuring high-precision accuracy.

Alberta municipalities Number of new addresses added since 2014
Calgary 31,897
High River 281

Address level precision should be utilized when comparing flood information to policies and performing other forms of analyses such as concentration analysis and proximity to other perils such as risk (e.g., underground tanks).

Click the links below to learn more about disaster risk management and disaster visualization tools:

To learn more about how your book of business may be impacted by overland flood in Canada, please contact us.

 

 

 

Disaster risk management in oil spill

Properties, Oil and Water Don’t Mix

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Oil and Water Don’t Mix.  That was especially true on Wed April 8, 2015 when a tanker in the English Bay in Vancouver was reported to be leaking fuel into the surrounding waters.

The spill amount was “above the norm” but not “catastrophic.” Local residents were warned to avoid the beaches on both sides of the bay, according to CBC News,

Transport Canada has reported the following major oil spills in western Canada:

  • In 1988, Vancouver Island was affected by a spill from an oil barge that lost approximately 87 tons of oil
  • In 2006, a B.C. ferry sank with 240 tons of oil on board.

Gauging the impact

You can view an event zone on a map and determine exposure quickly by linking impacted addresses to your book of business with DMTI’s Location Hub® Post Event Service. Custom event reports allow you to easily share exposure information across your organization. This ensures swift action and superior customer service.

What is the impact of oil spills on property values?

A report created by the Conversations for Responsible Economic Development (CRED) reveals the following key findings:

  • Both direct contamination & the perception of contamination have clear and well documented impacts
  • In several documented cases, directly impacted properties lost 10-40% of their value
  • The reputational impacts alone are significant – properties nearby spills will usually see a 5-8% reduction in value
  • The most significant impacts are felt in the first year and usually last less than 5 years

Assessing future risk

A proposed pipeline destined to carry more oil to the Westridge terminal in Burnaby, BC would increase the number of tankers traveling through Canadian waters from 5 to 34 per month (Global News).

How can organizations prepare?

  • Connect. Analyze. Act™
    • Seek a solution that provides timely and advanced insight into the duration, size, impact and number of addresses affected by an event. This allows you to easily share exposure information across your organization.
  • National insights in real-time
    • Take advantage of an offering that delivers property level event information and other perils that may impact your book of business.

How can I learn more?

 

Flood risk

Are Insurance Companies Measuring Flood Risk Accurately?

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On Feb 19 2015, Aviva Canada announced the availability of overland water endorsement. This meant homeowner coverage in Ontario and Alberta would start in May, and roll out to additional provinces throughout 2015.

In Canada, we now have national flood hazard maps and the ability to easily map each of our policies.

“What gets measured, gets managed” – Peter Drucker

Data Visualization Tools for Flood Risk

Patrick Lundy (CEO) of Zurich Canada said:

“Having the right tools, maps and predictive models is key to charging an accurate price for the risk, and capacity in certain areas may become harder to come by. Updated flood zone maps for Canada are of the utmost importance in being able to respond accurately to the increased flooding activity.” (Canadian Underwriter, 2013)

Today, insurance organizations have the ability to:

  • Identify and assess significant exposures in their portfolio
  • Identify new business without growing their 1/n year flood loss
  • Determine where they should not write new business
  • Identify flood risk which may require a more detailed assessment

“Opportunities multiply as they are seized” – Sun Tzu

Insurance Bureau of Canada (IBC) identified that overland flooding is a risk, but this is for a small percentage of the population. This refers to those who live in floodplains or flood prone areas close to rivers or lakes.

Leveraging this knowledge may lead to the creation of a new niche product offering for overland flood.

“Once we know something, we find it hard to imagine what it was like not to know it” – Chip & Dan Heath, Authors of Made to Stick, Switch

The Real Flood Risk

Van Bakel of Crawford recalled discussions that insurance companies shouldn’t worry about catastrophic events, and that everything was accounted for internally.

“Fast forward about six weeks. Two of the most populated areas of Canada would never flood within two weeks of each other, would they?”

Overland flood hazard maps and precise mapping (or geocoding) technology allows insurance companies to:

  • Understand the risk to your book of business
  • Identify which markets may have flood risk
  • Create new pricing models based on this risk
  • Generate new product revenue for the business

Click here to learn more about how your book of business may be impacted by overland flood in Canada, or contact us at info@dmtispatial.com.

 

Risk management for earthquakes

The Importance of Managing Earthquake Risk

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Do your risk management processes consider the risk of Earthquake?

October 16th marked the 7th annual ShakeOut where over 24 million participants worldwide will practice how to drop, cover and hold on at 10:16 a.m. during Great ShakeOut Earthquake Drills.

“ShakeOut BC Day” started in 2011 and this year over 660,000 participants in British Columbia will participate in drills.  The Charlevoix region in Quebec started participating in 2013 and the entire province has joined in for 2014 with over 80,000 participants registered.

Canadian Regions at Risk for Earthquake

Most people would initially think that British Columbia is most at risk when thinking about the risk of earthquakes in Canada.  However, parts of Quebec and Eastern Ontario are also at risk for earthquakes.  At a recent earthquake response seminar held in Toronto by the Catastrophe Response Unit (CRU), Dr. Kristy Tiampo, professor of geophysical modeling methods at Western University’s department of earth sciences in London, Ont. who also works with the Institute for Catastrophic Loss Reduction (ICLR) stated that “Montreal and Ottawa are both at significant risk of ground shaking” and noted that both cities have seen earthquakes that have measured around 6 on the Richter scale.

In an October 2013 report commissioned by the Insurance Bureau of Canada titled “Study of Impact and the Insurance and Economic Cost of a Major Earthquake in British Columbia and Ontario/Québec” two hypothetical earthquakes were modeled by AIR Worldwide.  One off the west coast of British Columbia measuring 9.0 on the Richter scale and one northeast of Quebec City measuring 7.1.  These two hypothetical scenarios would result in a combined estimated total insured losses of over $30 billion.

It is imperative for insurance companies to have a complete and accurate picture of the location of the property that they are insuring in context to the risks that surround that property.  This will allow them to rate the policy correctly and also to determine whether or not they want to assume the risk.  Understanding where the property is in relation to an earthquake zone is very important.  But not only is it important to know if the property itself is at risk, but also knowing where that property is in relation to other items that could be impacted by an earthquake.  For example, what if the property was close to a natural gas pipeline or propane processing facility?  Knowing about these potential risks in isolation is important to the underwriting and rating decision. But, what about when you also factor in earthquake?  An earthquake of a small magnitude may not be enough to cause much damage the property.  But what if it was enough to cause a gas leak, that then lead to a fire and an explosion?  Having this level of information could mean a big difference.

Disaster Risk Management for Insurance Companies

Another factor to consider for insurance companies is the accumulation of risk.  While the risk for the single property may be acceptable, knowing where all your existing policyholders are at the time you underwrite a mortgage and their relation to risks such as earthquake zones will be critical in determining whether you are willing to assume this additional risk or if your exposure is too high.  If there are two major events in a given year, would your exposure be too high and you wouldn’t be able to pay out on all the claims?

In Canada, various forms of location such as postal code boundaries, municipalities and Catastrophe Risk Evaluating and Standardizing Target Accumulations (CRESTA) zones (for earthquakes) are used to determine the accumulation of risk.

As per the ICLR, Canadian reinsurers, insurers and regulators use Catastrophe Risk Evaluating and Standardizing Target Accumulations (CRESTA) zones as the minimum standard for the capture of data and first level of calculation of probable maximum loss (PML).  PML evaluations can influence underwriting decisions, and the amount of reinsurance allowed on a risk can be predicated on the PML valuation.

The original CRESTA zones were established in 1981 and introduced in Canada in 1986.  They have been recently re-worked globally and have been re-launched to the market for 2012/2013.

All businesses can use this information to help define their contingency plans in event of an earthquake. Which of my existing store or branch locations might be impacted?  Where are my employees situated?  How would I deploy resources to help my customers most efficiently?  Where would I situate them?Insurance underwriting and exposure analysis is only one area where this information can be used.  Other examples include:

  • Public Safety departments within governments can use this to build contingency plans for their citizens, determine where they would locate remote relief sites, sites for temporary housing or medical facilities.
  • Telecommunication companies could use this to gain a better understanding of the risks associated with building out infrastructure in various parts of the country

Click here to see how DMTI’s disaster risk management tools help insurance companies effectively plan for every possibility.