1. IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Flood Insurance in Australia Andrew Dyer – IAG Natural Perils 14 November 2014

2. PAGE 2 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Outline Brief History of Flood Insurance in Australia Flood Insurance Premiums Victorian Data and Issues The Future of Flood Insurance Questions / Comments / Suggestions November 2014Flood Insurance in Australia

3. PAGE 3 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 About Insurance Australia Group (IAG) Memberships: IAG insures $1,420BN in assets: 10.3 million cars; 3.3 million homes; 108,000 farms; 128,000 employees; and 555,000 businesses. $6.9BN in claims paid in FY13/14 November 2014Flood Insurance in Australia

4. PAGE 4 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Economic Cost of Natural Disasters November 2014Flood Insurance in Australia 2013: $6.3BN 2050: $23BN Flooding causes an average $2.9BN total economic losses per year

5. PAGE 5 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Insurance Improves Community Resilience November 2014Flood Insurance in Australia

6. PAGE 6 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 History of Flood Insurance in Australia Pre-1974:Typically not included Post-1974: Specifically excluded 2007: Central Coast, Wollongong floods prompt reconsideration 2009: IAG introduces flood cover in NSW (opt-out basis) 2012: Queensland floods, RACV and CGU roll-out of standard flood cover 2014: Standard definition of flood on all insurance contracts November 2014Flood Insurance in Australia Source: “The History of Flood Insurance in Australia”, National Disaster Insurance Review 2011 Standard Definition of “Flood” The covering of normally dry land by water that has escaped or been released from the normal confines of: Any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or Any reservoir, canal, or dam.

7. PAGE 7 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Flood Risk vs Other Risks November 2014Flood Insurance in Australia Flood likelihood and severity is very location-specific A B Some types of risks (hail, earthquake, theft etc) occur frequently and randomly over a large area Flood premiums are specific to each address A B

8. PAGE 8 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Risk-Based Flood Premiums Premiums should reflect risk. Three main factors govern calculation of flood premiums: Likelihood of flooding Depth of flooding Cost of recovery Other commercial considerations: Risk appetite Discounting policies Customer relationships Choice of excess November 2014Flood Insurance in Australia

9. PAGE 9 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 November 2014Flood Insurance in Australia Risk-Based Flood Premiums Depth Profile (per property) Damage Curves Average Annual Damage Sum Insured Choice of excess Taxes Discounting policies Customer relationships Final Premium Building Location Building Attributes e.g. Floor Level Elevation Data Flood Mapping Likelihood of flooding Depth of flooding Cost of recovery

10. PAGE 10 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Indicative Flood Premium Breakdown November 2014Flood Insurance in Australia Source: Affordability of Natural Disaster Insurance (J Douglas & M Bowditch, 2013) THIS SLIDE IS NOT BASED ON IAG DATA Key Points: If insurer profits were reduced to zero, flood insurance premiums would not change significantly Government taxes are a significant portion of flood insurance premiums

11. PAGE 11 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 DEPI database of CMA flood hazard data DEPI data agreements with industry Great LIDAR coverage November 2014Flood Insurance in Australia Flood Insurance Data in Victoria

12. PAGE 12 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Review of 35 Council / CMA Flood Studies recently implemented at IAG Average 7% reduction in Flood Premium for 85,000 addresses November 2014Flood Insurance in Australia Premium Impacts of Council / CMA Flood Data Study area# of addressesAverage flood premium reduction Tweed-Byron Coastal Creeks 9,30053% Upper Parramatta River FRMP 5,80043% Benalla Flood Mapping (VIC) 5,00044% Partnership opportunities arising from shared data: Premium impacts of mitigation measures Comparison of mitigation measures Assistance with funding applications

13. PAGE 13 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 DEPI database of CMA flood hazard data DEPI data agreements with industry Great LIDAR coverage November 2014Flood Insurance in Australia Flood Insurance Data in Victoria Inconsistent consideration of rare / extreme events in flood studies Room for improvement in communicating rare / extreme flood risk to community

14. PAGE 14 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Regulations require premiums to reflect risk Insurance covers ALL flood events, not just events up to the 1% AEP Where Council / CMA studies do not include rare / extreme floods, insurers will turn to other data sources November 2014Flood Insurance in Australia Consideration of Rare / Extreme Events 1% AEP ExtentPMF Extent

15. PAGE 15 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 August 2014Flood Insurance in Australia Communicating Hazard Data to Residents Key Principle: Open access and disclosure of hazard data to support informed decision- making Approach: Flood hazard, not development controls. Range of recurrence intervals. Nil or low cost to residents. (Property floor level)

16. PAGE 16 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Key Principles: Insurance renewal notice should not be the first notification of flood risk Open access and disclosure of hazard data to support informed decision-making Approach: Community Information Sessions Cooperation with local and state governments Suggestions? November 2014Flood Insurance in Australia Community Engagement – Consistent Messaging on Risk

17. PAGE 17 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Future Developments in Flood Insurance Relatively new offering More granular pricing based on building attributes Reflecting effective mitigation spending with lower premiums Engaging with governments and communities November 2014Flood Insurance in Australia ?

18. PAGE 18 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 What is it? Where is it? What is it made from? What is the floor height? Data Requirements: Building Attributes November 2014Flood Insurance in Australia Photo 3 credit: Peter Trimming

19. PAGE 19 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Questions & comments November 2014Flood Insurance in Australia ?

20. PAGE 20 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Thank You Andrew Dyer Senior Flood Analyst IAG Re, Sydney Andrew.Dyer@iag.com.au +61 2 9292 1518 August 2014Flood Insurance in Australia

21. PAGE 21 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Integrated Floodplain Management Roles August 2014Flood Insurance in Australia During a flood Flood Response After a flood Recovery Before a flood Data Collection Town Planning Risk Management Plans Flood Mitigation Education Preparation Annual Australian Government Spending: $50M $560M

22. PAGE 22 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 How Flood Premiums are Calculated August 2014Flood Insurance in Australia Likelihood of flooding Depth of flooding Cost of recovery Calculated from Government flood studies where possible Scientific basis Local knowledge Our risk analysis reflects community perception Other sources: Internal and consultant flood modelling Commercial insurance databases Historical event analysis If insurers can not use Government flood hazard data, they will use other sources

23. PAGE 23 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Example Cross-Section Profile PMF 100yr (1%) 20yr (5%) Higher Depth 1.2m 0.6m How Flood Premiums are Calculated Likelihood of flooding Depth of flooding Cost of recovery August 2014Flood Insurance in Australia 10% AEP flood depth1% AEP flood depthExtreme event flood depth Likelihood and Depth Example (from typical Council Flood Study data) 10% event: No flooding 2% event: 0.05 m depth 1% event: 0.20 m depth 0.5% event: 0.45 m depth 0.01% event: 0.75 m depth

24. PAGE 24 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 How Flood Premiums are Calculated August 2014Flood Insurance in Australia Likelihood of flooding Depth of flooding Cost of recovery Cost of recovery depends on depth of flooding: Whitegoods and appliances Structural damage Clothing Major building repairs Waist deep+ Cabinets and bookshelves Electronics Building repairs Ankle deep Carpet Wallpaper Temporary accommodation Floor level Landscaping A/C compressor Wiring and plumbing Below floorOther issues Price escalation Housing availability Scarcity of tradespeople

25. PAGE 25 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 How Flood Premiums are Calculated August 2014Flood Insurance in Australia Likelihood of flooding Depth of flooding Cost of recovery Returning to our previous example: Exceedance Probability Depth above ground Depth above Floor Level Cost of Recovery* 10%N/A $ 0 2%0.05 m-0.35 m$ 2,000 1%0.20 m-0.20 m$ 8,000 0.5%0.45 m0.05 m$ 45,000 0.01%0.75 m0.35 m$ 105,000 * Cost of recovery values are examples for illustrative purposes only Area under graph = Average Annual Damage (AAD) AAD (calculated per address) is the basis of flood premiums. Lower likelihood or cost of recovery = Lower AAD = Lower premiums

26. PAGE 26 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Data Requirements: Importance of depth data Format of data (extent polygons vs flood surfaces) can introduce uncertainty Example: First flooded at 50 year ARI August 2014Flood Insurance in Australia Catchment A: Low depth flooding Catchment B: High depth flooding Depth 100 year = 0.3mDepth 100 year = 2.7m AAD = $50AAD = $1,000 100 year Catchment B 100 year Catchment A Source: “Managing Flood Risk Through Planning Opportunities”, Hawkesbury-Nepean Floodplain Management Steering Committee, June 2006

27. PAGE 27 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Data Requirements: Position of Building $170-> $50 $20,000 -> $100 Assume Building S.I. = $300,000 August 2014Flood Insurance in Australia

28. PAGE 28 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 SRTM Cost: Free Coverage: Global Quality: Poor in many areas – cannot be used in some areas Cost: low-moderate Coverage: many areas Quality: Medium Cost: high Coverage: limited Quality: High Data Requirements: Elevation Data Contour LiDAR August 2014Flood Insurance in Australia

29. PAGE 29 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Data Requirements: Elevation Data Legend: 200-year extent (similar to actual Jan 2013 flood) (yellow diagonal lines) 50-year extent (light blue shaded) 10000-year extent (dark blue shaded) BURNETT RIVER August 2014Flood Insurance in Australia

30. PAGE 30 IAG PowerPoint colour palette RGB breakdown R4 G32 B46 R0 G114 B207 R153 G220 B217 R171 G164 B143 R242 R203 B101 R255 G92 B94 R147 G17 B126 R109 G26 B66 R189 G208 B238 R114 G114 B114 R215 G211 B200 Working Together to Improve Flood Insurance To offer flood insurance, insurers need data: Council/CMA Flood Studies Accurate digital elevation models Floor level survey (if available) Providing data to insurers means our risk assessment matches community perceptions of risk National Flood Risk Information Project (2014/2015/2016/2017) Reliance on Council/Industry cooperation until 2017 Opportunity for State Government cooperation initiatives August 2014Flood Insurance in Australia