Modeling Flood Perils and Flood Insurance Program in Taiwan

Taiwan had approximately 3,000 buildings damaged by floods with an economic loss of NT$12.8 billion annually, a figure 4.5 times more than economic losses due to fire damages. Many insurers become extremely cautious when underwriting their flood policies for people living in areas that are frequently struck by floods. The rising damages also trigger the demand for a mandatory national flood insurance program. This paper describes the development of an integrated flood risk assessment model for Taiwan which contains of a hazard, vulnerability and financial analysis module. We take the perspective that the mandatory program will be provided to fire policyholders as part of building and content insurance to mitigate the financial losses. The issue of a long-term balance between fund accumulations and its claim payouts will be addressed along with policy recommendations based on the modeling results.