FloodSmart Analytics: a new way to assess flood risk for the mortgage and financial sectors

As Cop26 draws to a close, we’re pleased to unveil our new product FloodSmart Analytics that will enable insurers, risk managers and mortgage lenders to accurately assess flood risk at even single building level.

FloodSmart Analytics provides high-definition analysis for flood depths, probabilities and the costs of flooding from river, coastal, surface water and groundwater sources, including climate change impacts.

This will enable organisations across the financial services and insurance sectors to examine at even the most granular level the risk levels for buildings, which will result in better risk management decision-making.

Increasing extreme weather events due to the climate emergency have highlighted a significant disparity between the long-term nature of property lending, which is typically 25 years for a domestic mortgage, and the short-term nature of risk transfer through insurance, which is typically taken one year at a time.

Phillip Martin, who leads FloodSmart Analytics for GeoSmart Information, said: “Historical experience can no longer provide an adequate data set for using quantitative statistical models, which are currently heavily relied on.

“Using inferior data will lead to sub-optimal decisions by insurers, mortgage lenders and risk analysts, so it makes sense to use the best available data.

“We’ve developed FloodSmart Analytics to enable property buyers and their lenders and insurers to establish the flood risk of a single property or a whole portfolio of assets so that decisions can be made as to the type of coverage that is necessary on insurance.

“There is little point in a consumer/corporate going to a cheaper insurer if they discover the specific coverage they need has been excluded. By using this model, everyone can make informed decisions.

“We believe FloodSmart Analytics is a game changer because it identifies a mismatch with a property and insurance cover and help the financial institutions to work with the property owner to ensure the insurance is adequate and appropriate.”

The FloodSmart research and development programme supplements our work of delivering real-time groundwater data and daily groundwater flood forecasts to the National Flood Forecast Centre and water companies and integrating risk data for all sources of flooding to provide holistic risk assessment.

FloodSmart Analytics offers a much-needed alternative approach to statistical risk models and focuses on bringing GeoSmart’s already proven capability to the finance sector.

“Because FloodSmart Analytics has resolution to a single building unit – or smaller – there is no loss of analytical function, even when combining very large portfolios because the detail is never lost,” said Phillip.

“This means individual lending or insuring decisions can be tracked all the way to the risk management function and capital allocation decisions.”

For more details, visit our dedicated FloodSmart Analytics page.