Probabilistic Flood Loss Models for Companies

Abstract

Flood loss modeling is a central component of flood risk analysis. Conventionally, this involves univariable and deterministic stage-damage functions. Recent advancements in the field promote the use of multivariable and probabilistic loss models, which consider variables beyond inundation depth and account for prediction uncertainty. Although companies contribute significantly to total loss figures, novel modeling approaches for companies are lacking. Scarce data and the heterogeneity among companies impede the development of company flood loss models. We present three multivariable flood loss models for companies from the manufacturing, commercial, financial, and service sector that intrinsically quantify prediction uncertainty. Based on object-level loss data (n = 1,306), we comparatively evaluate the predictive capacity of Bayesian networks, Bayesian regression, and random forest in relation to deterministic and probabilistic stage-damage functions, serving as benchmarks. The company loss data stem from four postevent surveys in Germany between 2002 and 2013 and include information on flood intensity, company characteristics, emergency response, private precaution, and resulting loss to building, equipment, and goods and stock. We find that the multivariable probabilistic models successfully identify and reproduce essential relationships of flood damage processes in the data. The assessment of model skill focuses on the precision of the probabilistic predictions and reveals that the candidate models outperform the stage-damage functions, while differences among the proposed models are negligible. Although the combination of multivariable and probabilistic loss estimation improves predictive accuracy over the entire data set, wide predictive distributions stress the necessity for the quantification of uncertainty. Plain Language Summary River floods are among the costliest natural disasters. The appraisal of financial flood loss is integral to flood risk analysis. Scientists and practitioners use stage-damage functions to assess flood loss from the water depth at an inundated building. However, flood loss is also controlled by other factors (e.g., building characteristics and private flood precaution), and stage-damage functions only infrequently provide information on their reliability. Therefore, researchers developed more complex flood loss models, which consider multiple variables and provide information on associated uncertainties. While these novel flood loss models exist for private households, they are lacking for companies. In this study, we present three complex flood loss models for companies. We employ company loss data from flood events in Germany to compare the skill of the proposed flood loss models to each other and to two stage-damage functions. Our results show that the complex models estimate company flood loss more accurately than the stage-damage functions. The three complex models work equally well. Yet their loss estimates remain fairly uncertain, underlining the importance of reliabilit...

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