Flood threat resilience will require trade-offs warns broker

Broker Marsh has warned the world has to significantly up its resilience to flooding as the first two months of the year have delivered a stark reminder of the devastation they can wreak.

It has published its latest report into the threat, “staying above water”, which highlights the need for urgent and concerted action as both governments and the (re)insurance industry continue to count the costs of inadequate flood mitigation systems.

The report warned flood risk management is under strain, unable to cope with current levels of risk, let alone change risk trajectories globally. It added that there will be difficult decisions to be made given that there is no solution that will enable the world to protect all at risk.

“Flood risk is growing at an alarming rate across the world, posing increasingly complex challenges to socioeconomic systems, infrastructure, and the environment,” stated the report.

According to Marsh McLennan estimates, 18% of the global population is currently threatened by flooding, and even limiting global warming to 2°C would cause this percentage to double. Similarly, the impacts of flooding on infrastructure are already visible and set to grow over time, with power plants, international airports, and international ports increasingly under strain.

“Of all the natural catastrophes, flooding is the most rampant, posing ever-growing and ever-more complex threats to society and the environment,” the broker added. “The interplay between floods, climate change and nature loss, the rising concentration of people, and assets in flood-prone areas, and new vulnerabilities spreading across socioeconomic systems raise urgent questions concerning society’s preparedness and resilience.

“The share of urban areas, rural areas, and infrastructure threatened by flooding is approximately set to double in a 2°C warming scenario compared to today.”

Marsh warned given the scale and complexity of the challenge, society “needs a clear vision that moves beyond unsustainable paradigms of protection and strikes a balance between addressing crises and fostering resilience”. That involves painful choices but leaving the issue of flooding unaddressed will exacerbate its costs and devastating impacts.

Recent disasters have exposed the failures of current flood risk management strategies in both high- and low-income countries. Just two months into 2023 and Cyclone Gabrielle caused deadly flooding in New Zealand, and floods in California destroyed roads, levees and power networks. This follows two years of devastating and deadly flooding events across the world.

“But recent events were not exceptions,” the report added. “Previous years were also marked by catastrophe. In the United Kingdom, flash floods in London in July 2021 overwhelmed the city’s Victorian era drainage systems in a little over an hour, causing sewers to overflow.

“That same week, excessive rainfall triggered deadly floods in the Netherlands, Belgium, and Germany, leaving a trail of devastation to communities and transport infrastructure (particularly in the Ahr Valley). In China, the June 2020 floods were the worst in decades, affecting over 63 million people, causing $29 billion in economic losses, and damaging 76 cultural heritage sites.”

It continued: “All these events highlight how the threat of flooding is escalating while efforts to manage risks remain inadequate. Additionally, flood insurance protection gaps are growing in many parts of the world. Losses are leaving a mark on the sector and led to a particularly challenging 1 January 2023 renewal in some key markets, while in many countries flood insurance is still not available.”

According to the Marsh McLennan Flood Risk Index:

1 out of 3 people globally will be threatened by flooding in a 1.5 °C warming scenario, which could happen as early as 2030.

41% of power generation capacity, 37% of international airport seats, and 52% of international port outflows globally will be threatened by flooding in a 2°C warming scenario, which could manifest as early as 2050.

One-third of the world’s urban areas and nearly half (45%) of the population will be threatened by flooding in a 3.5 °C warming scenario, which could happen by the end of this century.

The broker said the threat now required “bold steps” from the public and private sector are needed to shift society from a responsive to an anticipatory approach to flood resilience.

The report is the latest instalment of Marsh’s Rethinking Flood series, identifies three ways for society to transform its approach to flood risk management:

  1. Learning to live with floods through a cross-societal push for resilience, with communities, businesses, and governments implementing small-scale measures to mitigate risks and minimize damage;
  2. Building strategic protection by deploying systemic interventions to protect critical assets and ensure financial resilience; and
  3. Preparing for relocation by facilitating resettlements of people and assets from high-risk areas in a timely, equitable, and financially viable manner.

“Not everyone can be protected, insured, or bailed out,” the report states. “To enable the transformation, decision-makers within government, regulatory bodies, businesses, and communities must be prepared to confront difficult trade-offs.

“An immediate priority is to set clear rules and responsibilities that are underpinned by knowledge of risk and do not shield stakeholders from the consequences of their risky decisions. Taking different types of stakeholders on the journey is crucial.

“To achieve this goal, strong narratives about co-benefits and clear information on risk levels and resilience strategies are essential.”

The report warned flood risk management is under strain, unable to cope with current levels of risk, let alone change risk trajectories globally. It added that there will be difficult decisions to be made given that there is no solution that will enable the world to protect all at risk.