New dimensions in flood catastrophe modeling

In this Insurance Post Q&A, Phil Harding speaks with Olivia Sloan, Head of Catastrophe Products at Fathom, about the latest advancements in catastrophe modeling and how insurers can leverage these tools to manage flood risk and drive strategic advantage.

The evolution of catastrophe models

Catastrophe models have been a cornerstone of the insurance industry since the late 1980s. Early models emerged after catastrophic events, such as Hurricane Andrew in 1992, exposed the limitations of relying solely on historical claims data. These models introduced probabilistic approaches that transformed underwriting, pricing, and risk assessment.

“Catastrophe models have become the most comprehensive tool for quantifying the impacts of catastrophic events,” says Olivia.

Current applications of flood cat models

Today, their applications extend beyond pricing and underwriting to regulatory reporting, stress testing, and portfolio management. For example:

• Regulatory reporting: Cat model outputs inform Solvency II capital requirements, US NFIP rate maps, and UK Flood Re insurance programs.
• Stress testing: Models enable insurers to simulate portfolio performance under varying hazard, vulnerability, or climatic conditions. Fathom’s Global Flood Cat (GFC) allows users to scale hazard and vulnerability inputs or integrate proprietary data to see how different assumptions impact risk metrics.

Advances in sophistication 

Over the last decade, scientific and technological progress has transformed cat modeling. Olivia explains:

“We’ve seen major improvements in terrain modeling, driven by machine learning and sensor technology. Fathom’s FathomDEM, a global 30 m DEM, now closely replicates true topography, approaching the performance of LiDAR-based flood modeling.”

Extreme events, like Hurricane Katrina, have also refined model assumptions about vulnerability and building standards. Open-source frameworks have further expanded accessibility and innovation, particularly for single-peril or secondary-peril models.

“There’s been a shift from ‘black box’ models to more transparent, customizable ‘glass box’ models. Global Flood Cat exemplifies this approach, enabling insurers to adjust hazard, exposure, and vulnerability data to reflect their unique view of risk.”

Fathom’s latest GFC update introduces the Climate Dynamics framework, allowing insurers to assess how future climates may impact flood risk. This is particularly valuable for long-term financial planning, such as mortgage portfolios, or for insurers aiming to mitigate exposure to climate-driven hazards.

Olivia highlights two key reasons insurers should consider climate scenarios:

• Risk mitigation: Identify and divest from assets increasingly vulnerable to future climate conditions.
• Opportunity identification: Strategically plan for growth or diversification in lower-risk areas.

“Considering future climate allows insurers to support sustainable development, update design standards, and promote resilient infrastructure. This ultimately helps bridge the protection gap and sustain the insurance market.”

Understanding hazard, vulnerability, and exposure

Catastrophe models rely on three core components: hazard, vulnerability, and exposure. The interaction of these modules drives future risk assessments:

• Hazard: Increasing global temperatures and sea levels are changing flood patterns.

• Exposure: Advances in AI mapping improve understanding of the built environment.

• Vulnerability: Building codes, retrofits, and risk management practices can reduce exposure.

“Future risk is about more than just hazard,” says Olivia. “Vulnerability improvements offer insurers a tangible way to influence resilience and reduce potential losses, and Global Flood Cat allows you to model these scenarios flexibly.”

Variances between cat models are common, reflecting differences in data, methodology, and calibration. Olivia emphasizes that understanding these differences (and the inherent uncertainties) is key:

“Models are tools, not reality. Their divergence provides insight. At Fathom, we prioritize scientific rigor, transparency, and flexibility. Global Flood Cat combines:

• Global coverage across all flood perils
• Climate Dynamics to model future scenarios
• Customisable hazard, vulnerability, and defense inputs
• Open access to vulnerability curves and methodologies”

Fathom also actively supports industry collaboration via the Oasis LMF open-source platform, fostering innovation and transparency in catastrophe modeling.

Take the next step

Explore the new dimensions of flood catastrophe modeling with Fathom:

• Watch the product briefing: Global Flood Cat Webinar
• Find out more about Global Flood Cat 
• Request a demo: Global Flood Cat Demo

“The more we understand flood risk under current and future conditions, the better positioned insurers are to manage risk, protect communities, and drive sustainable growth.”