2023 Innovation Awards: ?Flood Resilience Scores

reThought Insurance
Flood Resilience Scores

Uncertainty around flood risk has made commercial underwriters wary of the peril for years, and growing losses related to climate change have heightened concerns.

When reThought Insurance Corp. formed in 2017, the founders saw flood insurance as a market where technology could be brought to bear to improve underwriting and risk mitigation, said Cory Isaacson, Broomfield, Colorado-based co-founder and CEO of the managing general agent.

“We looked at a lot of different things, but the flood market was tremendously compelling,” said Mr. Isaacson, who had previously worked as chief technology officer at catastrophe modeler Risk Management Solutions Inc.

He also had a personal interest in the flood insurance market, having suffered a moderate uninsured flood in his home. He said he was deterred from buying coverage against future events by the steep premium and the limited coverage under the National Flood Insurance Program he was quoted.

One of the problems that underwriters face with flood risk is that existing catastrophe models vary significantly in the estimated exposures they produce for the peril, Mr. Isaacson said.

Flood models are excellent tools, but they are not designed to effectively underwrite specific individual risks, he said. “Flood is really a peril of inches. You can be on one side of a building, or another side and you have much, much different risk characteristics.”

To develop its Flood Resilience Scores, reThought identified about 100 million buildings in the United States and did a “bottom up” analysis supported by artificial intelligence for each site, Mr. Isaacson said. The analysis considered 160 different attributes, including building features and weather patterns, he said.

It took two-and-a-half years and “trillions of calculations” to develop the scoring tool, Mr. Isaacson said.

The flood score incorporates changing weather patterns. Previously, flood risk was largely associated with proximity to rivers and other water sources, but warming temperatures have increased flooding from rain, he said.

On a historical basis, the scores have proved to be more than 90% accurate, Mr. Isaacson said.

The scores, which like credit scores top out at around 900, can be used to help mitigate risks and improve underwriters’ confidence, he said.

“Capacity providers are gaining more confidence, and getting more capacity into the funnel is the answer to being able to have an affordable flood product for everybody,” Mr. Isaacson said.