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Hell or High Water? An Economic Analysis of the Swedish Institutions for Flood Risk Management

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  • Erik Lenntorp

    (Department of Management and Engineering, Linköping University, 581 83 Linköping, Sweden.)

Abstract

Regulation of waters to generate electricity contributes to two different, but related flood risks. A dam may break resulting in a catastrophic accident. “High flow” floods are less costly and occur when there are large amounts of rain falls in combination with filled reservoirs. Here, the Swedish approach to flood risk management is studied from a social welfare perspective. Risk of dam owner insolvency implies that strict liability should be combined with regulation to prevent dam breaks. Negligence is argued to be the appropriate liability rule for high flow floods. Negligence assures that dam owners do not avoid liability by raising water levels in their reservoirs, and thereby increasing the risk of dam breaks. High flow floods are inevitable. The best strategy is to reduce the ensuing costs by appropriately incorporating flood risks in land use regulation, and by pricing flood risk in available property insurance. The Geneva Papers (2008) 33, 323–336. doi:10.1057/gpp.2008.5

Suggested Citation

  • Erik Lenntorp, 2008. "Hell or High Water? An Economic Analysis of the Swedish Institutions for Flood Risk Management," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(2), pages 323-336, April.
    • Handle: RePEc:pal:gpprii:v:33:y:2008:i:2:p:323-336
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    Cited by:

    1. Lenntorp, Erik, 2009. "On the joint use of licensing and liability," International Review of Law and Economics, Elsevier, vol. 29(3), pages 244-251, September.
    2. Matthew Wood & Daniel Kovacs & Ann Bostrom & Todd Bridges & Igor Linkov, 2012. "Flood Risk Management: US Army Corps of Engineers and Layperson Perceptions," Risk Analysis, John Wiley & Sons, vol. 32(8), pages 1349-1368, August.

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