Unprecedented flooding in Dubai in April highlighted the potential severity of this risk in an area where, historically, rainfall has been scarce. The floods also underscored the need for adequate reinsurance protection and for reinsurers to ensure their books of business are diverse.
Earlier this year, Dubai suffered record-breaking rainfall that resulted in severe flooding across the emirate. The most severe rainfall that Dubai has seen since records began 75 years ago led to large property losses, significant disruption to travel and the tragic deaths of at least five people in Dubai, and several others elsewhere in the UAE.
On April 16, 2024, a 48-hour period of severe storms resulted in 25 cm of rain – roughly twice the yearly average rainfall for the UAE – falling on Dubai, the most populous and urbanised of the seven United Arab Emirates. Government employees were instructed to work from home for a week while private sector employers were encouraged to tell colleagues to do the same.
Schools were closed, roads were rendered impassable, the emirate’s metro system had to be shut down, and Dubai International Airport – the world’s second busiest hub – suffered severe disruption.
Causes of the flooding
Some reports initially suggested that the severity of the rainfall might have been caused by cloud-seeding, a technique sometimes employed to induce rain in areas where water is scarce by implanting chemicals into clouds.
The UAE’s Meteorological Agency, however, dismissed those reports saying that no cloud-seeding had taken place in the days leading up to the severe rainfall. Experts say that the severe rainfall was more likely a result of climate change.
The flooding was particularly severe because Dubai’s drainage systems – previously untested by such dramatic rainfall – were unable to deal with such a large volume of water in so short a period of time. In the wake of the flooding, Dubai’s leader Sheikh Mohammed bin Nahyan announced a large-scale infrastructure project to upgrade the emirate’s flood defence systems.
The $8 billion project, known as Tasreef, will begin next year and will enhance Dubai’s drainage systems, boosting its capacity seven-fold and enabling up to 20 million cubic metres of water to be drained per day.
Increasing frequency?
The severity of April’s rainfall was unprecedented since records began in the UAE 75 years ago. And there is evidence to suggest that the frequency of such events may also be on the increase.
In August 2022, several countries in the Gulf Cooperation Council (GCC) – notably the UAE, Saudi Arabia and Oman – suffered thunderstorms and torrential rain that led to widespread flooding.
According to research by Moody’s, the GCC has been hit by seven severe storms and cyclones over the past five years, compared with four in the previous five-year period.
It’s clear that flooding is likely to become a more pressing concern for reinsurers in the region.
Reinsurance impacts
At this early stage, it’s hard to quantify the final market loss with reported figures between USD 2bn and USD 4bn.
The heavy concentration of losses from the recent floods falls on property, motor and – to a lesser extent – engineering lines of business. This underlines the importance to reinsurers in the region of having a diverse book of business supporting cedant clients across multiple lines.
At the recent 1/7 reinsurance renewal – a major renewal date for the GCC region – there was not a significant withdrawal of capacity, but property and motor rates increased significantly to account for this exposure. Rates increased by an average of about 30% in the UAE and deductibles typically were increased.
As we look to the future, it would seem likely that the frequency of storm events is a concern to be shared by insurers and reinsurers and managing exposure and pricing for the risk is paramount for the stability of the market.
