Save Some For a Rainy Day: Assessing the Economic Risk of Extreme Rainfall Events

Abstract: Extreme rainfalls cause large economic damage, they are also expected to become more frequent due to climate change. To design efficient climate adaptation policy and insurance pricing, it is necessary to assess which areas and properties are the most at risk. This study utilizes detailed insurance claim data and weather observations from 795 weather stations in Sweden. Many previous studies of extreme rainfall and the damage it brings are event-based. This thesis contributes to the current literature by describing extreme rainfall risk and its sources, based on events from every Swedish municipality between 2011-2020. The main findings are that the number of extreme rainfalls during a year and the daily amount of rainfall, leads to more damages but not larger damages. Furthermore, the result suggests that properties with a simpler type of water connection or no connection seem to have smaller damages. Another finding is that properties connected to a municipality-managed system are more frequently damaged.