Actuarial Analysis of Flood Risk and Its Implications for Property Insurance in Kogi State

This study conducts an actuarial analysis of flood risk and examines its implications for property insurance pricing and penetration in Kogi State, North Central Nigeria. Kogi State, situated at the confluence of the Niger and Benue Rivers, is among the most flood-prone states in Nigeria, with recurring annual inundation causing significant property losses. Despite this elevated risk, formal property insurance penetration in the state remains extremely low, partly due to inadequate risk quantification and unaffordable premiums for rural property owners. This study uses secondary data from the National Emergency Management Agency, the Nigerian Hydrological Services Agency, and NAICOM loss reports for the period 2018 to 2023 to construct a flood loss frequency and severity model for Kogi State. Geographic information system mapping of flood zones is combined with historical claims data to calibrate risk parameters. Expected annual loss estimates are computed for representative property categories. Findings reveal that flood risk is significantly underpriced in the small number of property policies written in Kogi State, with actual loss ratios averaging 148 percent over the study period. The study concludes that the combination of high flood risk, low insurance penetration, and inadequate pricing creates a significant protection gap for Kogi State property owners. It recommends a government-supported parametric flood insurance scheme with community-level risk pooling as a viable mechanism for improving flood risk coverage in the state.

Keywords: flood risk, property insurance, Kogi State, parametric insurance, risk pooling.