UAE flash flooding latest warning of global weather threat

Insurers in the United Arab Emirates are still calculating the cost of the record-breaking rainfall which delivered a year’s worth of rain in the space of 24 hours.

Dubia’s airport was forced to close and grounded almost 1300 flights as the runways were flooded with some aircraft damaged by the rising waters.

As the waters subsided many insurance analysts say the economic costs will be significant but the low insurance penetration will keep a cap on claims.

The deluge was the 10.03 inches of rain recorded at the UAE’s Khatam Al Shaklah station, with Dubai seeing 5.59 inches, the biggest figure since record began in 1949.

Ratings firm AM Best said it expects the extreme weather and severe flash flooding to prompt swathes of claims for motor, property and business interruption insurers in the region.

It has released a new commentary, “UAE Insurers Adapt to Changing Weather Trends as Latest Flooding Costs Mount,” that suggests low insurance penetration, coupled with extensive reinsurance cover, should keep the cost borne by the country’s primary insurers at a manageable level.

The report warned extreme weather across the Middle East has dumped the heaviest rainfall in 75 years on the United Arab Emirates (UAE) prompting damage and delays that will lead to a surge in insurance claims

Motor is the insurance segment most vulnerable to natural catastrophe events for primary insurers in the UAE as these risks are largely retained by the market.

In terms of property insurers’ exposure to flood events this remains is limited by the low level of insurance penetration for personal property, and home contents insurance.

However, Best said it has already found some evidence of UAE insurers starting to take actions to reduce potential flood claims costs through loss mitigation measures.

Steffi Uhlemann-Elmer, director of Model Product Management at Moody’s RMS said the weather events this week will have far wider implications for the region than the cost of the losses.

“The flooding this week in the Persian Gulf is a stark reminder that flood risk is a truly global peril,” she explained. “Communities were left submerged in the most severely affected countries of United Arab Emirates, Bahrain and Oman and international travel was significantly disrupted.

“The amount of rainfall that has been recorded in this event has exceeded historic levels. However, the region is also no stranger to intense precipitation – it is the scarcity of these events that challenges awareness for the hazard and leads to a lack of planning and preparedness.”

Uhlemann-Elmer continued: “The Gulf region is an area that is typically underserved with solutions for managing flood risk. Moody’s global flood hazard data can help to identify the level of risk that can be expected from such flood events and with that can support important risk mitigation action.”