Rational re/insurance pricing key to mitigating flood risk, says Fathom’s Dr Sampson


“If the re/insurance market prices flood risk rationally, it will increase pressure for wider rational behaviour, which in the long term will encourage decisions that properly account for the underlying risks,” suggests Dr Chris Sampson, co-founder and CTO of flood and climate risk intelligence provider Fathom.

Sampson’s comments stem from an interview with Reinsurance News, where he talked about the progress Fathom has made since its launch in 2013, alongside the problems the firm aims to help to solve and the significance of maintaining strong relationships with academia.

“When we started the business, the main problem that we were trying to solve was the fact that flooding itself is a global phenomenon,” Sampson said.

He continued, “Most countries in the world experience it to some degree, though the vast majority have very little information about the hazard.

“We in the UK are quite lucky in that our Environment Agency knows quite a lot about this, but most places in the world don’t have that information.

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“Despite being a global problem, the phenomenon itself is very localised. If you are in a particular location that’s being flooded, what’s happening on the ground is far more localised than earthquakes or hurricanes, in that you can be stood only a few meters away from a neighbour and you might be completely fine, while they’re in a lot of trouble, just because it’s so defined by very small scale, local elevation topography.

“Therefore, modelling for the whole planet is incredibly difficult. We’ve made big progress in terms of our ability to model everywhere, but there’s still plenty to do.”

Indeed, Sampson suggests that the problem has grown substantially, burgeoning in recent years to also include climate.

“10 years ago, people were less interested in exactly how this phenomenon might be changing. In the last three or four years, there’s been a huge shift in focus towards how might it already have changed from the historical record, how might it change in the future, and how different parts of the world or different localities are going to experience those changes. That has become a fundamental part of the problem that we’re solving for.”

When asked whether Fathom has exceeded its initial expectations, Sampson said, “From a technological perspective, have we got further than we thought we might in terms of what we can do? The answer to that is yes.

“The skill with which we’re able to produce information about flood hazard and flood risk has increased significantly, and that’s particularly the case in parts of the world that previously had no information whatsoever.

“We’re working with more industries than we thought we would. When we started the business, insurance was the focus. We’re now working with engineering firms, the broader financial markets, disaster response entities, and the World Bank on international development.”

He continued, “Obviously, we were hopeful 10 years ago that we’d do a good job and we have done from a business perspective.

“We’ve also managed to maintain the desire to keep publishing and not to just have a superficial relationship with academia.

“If you have a genuine working relationship with academics around the world, and you are publishing, and you’re involving them in the work that you’re doing, you get access to data and the kind of method collaborations before other people do. This sort of symbiotic relationship is very valuable to us.

“Many of our clients are very technical, they have people on their teams who are very technical. These people go to the academic literature to try and understand the state of the science and if we’re very visible within that, it demonstrates our expertise and leads clients to us.

Adding more on the benefits of having close ties with academia, Sampson said, “It brings people to us. It helps people understand what’s actually going on within our data and our models, where the strengths are and where the weaknesses are. It’s fantastic for relationships. It’s great for talent acquisition and retention.

“There are challenges within academia at the moment. It’s a difficult world to work in. We’re able to offer people a career where they can do many of the things they would have liked to have done in academia, while also offering them the security that academia maybe struggles to. This brings the best people into the business and motivates them to stay.”

Sampson continued, “When it comes to applying information that comes from climate models to impact and risk models. It’s very, very difficult to do, and it’s a very contentious space.

“We’re really at the very early stages of being able to do it because climate models themselves were not designed to produce local information about unusual, extreme risks.

“I think transparency of methods and transparency of data is important. It’s a critical part of ensuring that the data and the models are used appropriately, because this stuff is difficult, and I think if you overclaim or you obscure what it is that you’re doing, there is a real risk of data being misused.”

Concluding the interview, Sampson disclosed a few of Fathom’s long-term and short-term goals.

He noted, “We’re updating our model over the US, that’s a project that will be released this year. The US is an important market, and it’s somewhere that we’ve operated for a long time.

“The big stuff that we’re working on is in the global catastrophe modelling space for flood. So, moving from the hazard side of things through into full risk modelling.

“It’s a very big project, and we’ve made some hires recently that are helping to accelerate that work.”

Fathom recently announced that Malcolm Haylock had joined the firm as Head of Catastrophe Modelling.

Haylock is based in Zurich, Switzerland, and works closely with Fathom’s global team, which is headquartered in Bristol, UK. According to the firm, together, they will develop and deliver risk models that address the ever-evolving needs of a wide range of sectors.

As global climate change continues to impact weather patterns and increase the frequency and severity of flooding, it’s more important than ever to be informed.

Stay tuned into Reinsurance News to keep up to date on the latest developments and insights.

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