Insurers have regrouped after flood of claims in '97 and '02

Czech insurance companies and global re-insurers were hit hard by claims in the wake of the 2002 floods. Insurers have since invested heavily into computerised assessment tools.

Insurers have regrouped after flood of claims in '97 and '02

Floods in Prague

Two major floods hit the Czech Republic in less than a decade. The first, which swept through Moravia in 1997, laid waste to huge tracts of farmland and killed thousands of animals. It was classified as a "hundred-year" flood, meaning you wouldn't expect to see the likes of it again for another century.

But just five years later, in August 2002, it was Bohemia's turn — and on an even larger scale. The "five-hundred year" flood that swept through historic Prague and the Vltava River basin led to the evacuation of over 200,000 people from their homes.

Following the 1997 floods, insurers paid out over 10 billion crowns in claims. Flood-related insured losses in 2002 were significantly higher, amounting to some 1.2 billion euros compared with an economic loss of 2.3 billion euros.

Floods in Prague

Ivo Banovsky is the managing director of MultiMedia Computer, a firm which in 2002 used Geographic Information System software to develop a flood-risk assessment tool for insurers and underwriters looking to reduce their exposure.

"We have been working on flood-related tools and methodologies since 1996 and we have been involved in evaluating and creating some results from the huge Moravian flood in 1997 — so this wasn't the first flood, but the strongest. And from that time we cooperated with the biggest insurance companies on the Czech market to figure out how the risk for floods can be assessed and taken into account in general property insurance."

MultiMedia Computer has developed an interactive digital map on CD-Rom, a tool that can give insurers an extremely precise picture of the risk to a particular area.

"We used our GIS software to build a tool that can be used for flood-risk assessment, which means you can type in an address of a property and you will get an image how the area looks around the property and you can check the flood risk. And the map shows exactly the house which holds this address."

So how great is the risk of a flood today? Ivo Banovsky again:

"We have six different flood zones, from very high risk, up to nearly no risk. You cannot say there is no flood risk because, for example, flash floods can come anywhere. In the summer, there is a bigger danger of flood as we have very hot weather and storms come. And floods are not the only peril which is relevant right now. We have earthquakes; we have fires."

Earthquakes? In the Czech Republic?

"You would be surprised. We have studies from the Academy of Sciences and there is earthquake danger in the Czech Republic. Of course, it's not on the first place."