It is clear that as insured and economic exposure grows in China, there will be a need for more information around which to base decisions regarding the impact of flooding and seawater inundation. In a reinsurance and ILS investing context, underwriters and investors should understand the variability of flood in China, as it pertains to extreme precipitation and tropical cyclone storm surge inundation. It is interesting to note that portions of China are ranked by a World Bank report (Dilley et al 2005), as being amongst the more flood prone areas of the world, as displayed in the figure below from NASA’s Socioeconomic Data & Applications Center.
The purpose of this paper is to introduce some background on these risks for the benefit of those undertaking pricing and risk aggregation exercises. Much of this paper stems from data and conclusions from the RPI2.0 projects, “Relating Large Scale Climate Drivers to Regional/Continental/Global Scale Frequency of Extremes” by Dr. Timothy LaRow and Lydia Stefanova of Florida State University, and “Mapping the Influence of Climate Variability on Global Scale Flood Risk,” which was undertaken by Dr. Philip Ward and colleagues– VU Amsterdam, 2014. There is historical (but still relevant and useful) work that has been conducted by RPI on China historical and paleo tropical cyclone landfall which we also review here. Combined with additional data on economic exposure, this report will focus on areas of risk from flooding and storm surge, specifically Guangdong Province (including Hong Kong) and the Yangtze River basin (including Shanghai), and outline some of the climate-scale factors which contribute to flood and inundation variability.