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Physical risk estimates of real assets often lack estimates of vulnerability and the financial value of these risks. Using the 2023 flood in North-Eastern Italy as an example, we will demonstrate how our approach yields robust quantification of the expected financial loss, which is similar to the financial impact reported by local authorities.

Road damage estimations from floods in Italy

Storm Minerva hit North-Eastern Italy with heavy rain on the 15th and 16th of May, 2023. The equivalent of 20 cm of rain falling in 36 hours, in some areas up to 50 cm, when average rainfall in the region is 75 mm for the entire month of May. Simultaneously, months of drought also limited the ability of the soil to absorb water, and 20 rivers burst their banks (Ghiglione & Bettiza, 2023). The resulting event was quickly labelled Italy’s “worst flood in a century” (Braithwaite & Haq, 2023). The affected areas were Bologna, Forli’-Cesena, Ravenna, and Rimini in the Emilia Romagna region.

Using the infraMetrics database, we derived the damage factor for infrastructure assets in these areas. First, we examined roads’ (IC6050) exposure to flood and the realised flood damage. The figure below shows the extent of a 100-year flood event in North-Eastern Italy (black shades) and how the road sector in each of the affected areas is exposed to flood risk, demonstrated by the damage factor (blue shades).

Italy1.png

Demonstration of a 100-year flood (black shades) in the Emilia Romagna region and the respected damage factors (in blue shades) for the road sector in the four dominant areas (own illustration)

As Ravenna was most affected by the flood, we focussed our results on that area. The figure below presents the extent of the actual flood (in blue) mapped by the Copernicus network of satellites compared to the 100-year flood model (in black). The results showed that the May 2023 flood event was not as bad as a 100-year event could be. The actual and the modelled flood correspond highly (~60%), but not all floodable areas were flooded, while other underestimated areas were.

Italy2.jpg

The actual (blue) vs. modelled (black) flood in the Ravenna area for a 100-year event
(own illustration)

Following the example of the Ravenna area, we derived a financial estimate of the exposure to flood risks as well as an estimate of the actual costs of the May 2023 flood in three steps. First, we quantified the estimated replacement value of the road network affected by the flood. We opted for a replacement cost approach to estimate the value of the highways and roads in the area (based on the European Commission’s latest estimates of the costs of building and repairing roads in Europe and Italy; see Appendix III). The table below shows that the road network in Ravenna is equivalent to a replacement value of approximately 4.3 billion Euros and that the value of the actual affected road network (6.97%) is 321 million Euros.

Table: Financial calculations for the actual value loss based on total replacement value and the affected road proportion

Road Type

Length
(in km)

Total replacement value (in MEUR)

Affected road proportion

Total replacement value of affected areas (in MEUR)

Highway

84.65

922

3.03%

28

Primary Road

311.48

1931

12.96%

250

Secondary Road

367.89

1523

2.80%

43

Total

 

4376

 

321

Second, we consider the value of the flood risk exposure for roads in Ravenna. With a 1 per cent probability, highways and dual-carriage ways can be damaged by an average factor of 11.7 per cent, which puts the 99% Value at Risk for roads in this region at 528 million Euros.

Table: 99% Value-at-Risk (VaR) from pluvial flood for the Ravenna road network

Road Type

Length (in km)

Model: 100-year damage factor (%)

Total replacement value (in MEUR)

Value at Risk (in MEUR)

Highway

84.65

10.18

922

94

Primary Road

311.48

13.48

1931

260

Secondary Road

367.89

11.42

1523

174

99% Value at Risk

528

Finally, we combine both and apply the damage inferred by the flood model to the areas of the road network that were actually affected. The table below shows that the affected roads suffered three times higher levels of damage than the average road in Ravenna, which highlights the skewness in the exposure to flood events. Areas that are more likely to be affected by physical risks are also exposed more extremely than the average area. Combining the implied damage from the flood model with the asset value of the affected area provides a cost estimate of 92 million Euros.

Table: Estimated loss in road infrastructure value due to the May 2023 flood in Ravenna, Italy

Road Type

Value of affected roads (in MEUR)

Implied damage factor (%)

Estimated loss (in MEUR)

Highway

28

29.91

8

Primary Road

250

29.43

74

Secondary Road

43

22.50

10

Total Estimated Loss

92

Shortly after the flood, conservative estimates calculated the costs of rebuilding roads in the Ravenna area to be around 120 to 150 million Euros (Rizzuti, 2023). Due to its conservative nature, the estimation is slightly above our figure for the actual affected areas and an estimated value loss of 92 million Euros. This exercise thus shows that by taking assets’ vulnerability to hazard events into consideration, we can derive robust estimates of financial loss caused by a hazard event.


Braithwaite, S., & Haq, S.N. (2023, May 19). Italy’s ‘once in a century’ deadly floods are linked to climate crisis, researchers say. CNN. https://edition.cnn.com/2023/05/19/europe/italy-floods-climate-crisis-intl/

Ghiglione, D., & Bettiza, S. (2023, May 19). Italy floods leave 13 dead and force 13,000 from their homes. BBC. https://www.bbc.com/news/world-europe-65632655

Rizzuti, S. (2023, May 23). Quanto costa la ricostruzione dell’Emilia-Romagna dopo l’alluvione: la conta dei danni. Money. https://www.money.it/quanto-costa-ricostruzione-emilia-romagna-alluvione-conta-danni

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