Assessing tropical cyclone flood risk in Australia – Implications for catastrophe modeling

Australia has the 11th largest non-life insurance market in the world and like the United States, the majority of population is along the coast, with several cities (e.g. Darwin, Cairns, Townsville, Brisbane) located in tropical cyclone prone regions. Historically, wind damage dominates tropical cyclone losses; however, freshwater flooding has caused significant property loss along the coastal regions north of 30°S and is almost always included with homeowner and commercial policies under windstorm coverage. In 1974, cyclone Wanda caused the worst tropical cyclone induced flooding in the 20th century , in Australia, resulting in $2400 AUD million insured loss (2010 dollars), with as much as $7000 AUD million economic loss (2010 dollars). Wind losses from Wanda were low but in general there is little correlation between tropical cyclone wind and flood damage. Thus flood damage and loss must be explicitly modeled as part of any catastrophe model.

A modeling case study is conducted whereby precipitation output from the Weather Research and Forecasting (WRF) model is used as input to a rainfall-runoff model that is based on the CASCade 2 Dimensional SEDiment (CASC2D-SED) model. The precipitation and peak flood depth validation to land and river station data demonstrates that such a two-step modeling approach accurately captures the magnitude and extent of Wanda's precipitation and flooding. The peak flood depth is then used as input to a tropical cyclone catastrophe model for Australia, currently under development by AIR, to estimate flood loss. Good agreement for Cyclone Wanda demonstrates the value of explicitly accounting for inland flood loss from tropical cyclones and for quantifying flood risk for rate-making purposes in Australia.