Climate Stress Testing for Enhanced Understanding of the Flood Hazard and its Socioeconomic Impacts in Italy

To contribute to a more resilient flood risk management in Italy, we employ the recently published Verisk Inland Flood Model for Italy to conduct climate stress testing. We focus on the sensitivity of modeled losses to precipitation and leverage the meteorological dataset obtained from the Climate Model Intercomparison Project Phase 6 (CMIP6) for identifying projected precipitation trends and analyzing the potential effects of climate change on inland flood losses in the future, exploring different Shared Socioeconomic Pathways (SSPs) and Representative Concentration Pathways (RCPs). The methodology involves analyzing correlations between annual or seasonal precipitation and the corresponding annual loss cost, which is defined as annual loss divided by the total insured value. By exploring these relationships, we seek to enhance our understanding of how precipitation patterns influence the financial implications of flood events in various Italian regions. Additionally, we use the 10,000-year stochastic catalog embedded in the Verisk Inland Flood Model to explore the impact of expected climate change-related changes in annual precipitation for each Italian region, addressing the climate change-based precipitation targets. This enables us to run the fully probabilistic Verisk Inland Flood model and to assess whether anticipated alterations in precipitation levels correspond to expected changes in Annual Average Loss (AAL). This approach allows us to dynamically adapt our flood risk model to varying climate scenarios, providing valuable insights for the (re)insurance industry, as well as academia and government agencies that are seeking to navigate the evolving landscape of flood-related risks.