Moody’s RMS’ Muir-Wood predicts “significant” Mediterranean floods this year
Record temperatures this summer will lead to “significant” floods around the Mediterranean later in the year, Moody’s RMS chief research officer Robert Muir-Wood has warned.
Speaking to The Insurer TV at this year’s Rendez-Vous about how climate events are changing, Muir-Wood predicted that other Mediterranean countries will follow Greece and Turkey in being affected by serious floods, after the hottest July on record globally.
“We have seen such hot conditions this summer, heating up the Mediterranean, that we're actually going to get some significant floods around the margins of the Mediterranean,” he said.
Areas that have experienced high temperatures and wildfires are more likely to later experience floods because ground that has become parched and hard loses its ability to absorb water, which can lead to flash flooding, he explained.
Muir-Wood told The Insurer TV the floods would appear in places that tend to have high rainfall in autumn, such as the south of France. “I would not be surprised if there were significant floods in the region around the western Mediterranean,” he said.
While such floods could prove to be costly for the insurance industry, Muir-Wood doesn’t expect payouts to reach the highs of previous years, further highlighting the growing protection gap around flood risk and other so-called secondary perils.
“In Italy, there is not a lot of insurance [as] people assume the government will bail them out … On the commercial side, there's insurance being purchased, [but] I don't think it's going to be a very big deal … nothing like the 2021 floods in Germany and Belgium, which caused €10bn or more of insured loss,” he said.
Muir-Wood’s prediction follows devastating wildfires across Europe this summer, particularly in Greece, to which he argues the reinsurance industry has been slow to react. He said that while Greece and Portugal have seen the biggest wildfires over the previous year, both countries have “relatively low” insurance take-up rates.
“These fires are happening in rural areas, they're affecting smallholdings in particular. [These are] people who typically do not have insurance, so it’s not been a big deal for insurance so far,” he explained.
“But, I would anticipate that, before too long, we're going to have to treat wildfires in Europe more seriously, in the same way we learnt to treat wildfires in the US seriously after the events of 2017 and 2018.”
Muir-Wood argued that the whole industry will need to start modelling wildfires in Europe and reinsurers will need to take wildfire losses more seriously, in terms of their potential to pass into reinsurance policies.
Similarly, on the prospect of earthquakes, Muir-Wood suggested insurers need to check their models following huge quakes in Turkey and Morocco this year. He said the industry needed to “ensure [it is] really capturing extreme events beyond those that we've experienced in recent history”.
Overall, Muir-Wood advocated for the industry to rethink secondary perils, starting with renaming them altogether. “The term secondary perils sort of implies a second class of losses, but these so-called secondary perils have the potential to cause losses as big as primary perils,” he added.
Watch the 10-minute interview with Moody RMS’ Robert Muir-Wood to hear more on:
- The impact of record summer temperatures in Europe that will lead to severe floods around the Mediterranean this year
- How the reinsurance industry needs to rethink its models for natural catastrophes to be fully prepared for a spike in floods, wildfires and earthquakes that is likely to occur around the world
- How it’s time for the industry to stop thinking of significant risks as ‘secondary perils’