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A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe

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  • Paul Hudson

    (University of Potsdam)

Abstract

Risk-based insurance is a commonly proposed and discussed flood risk adaptation mechanism in policy debates across the world such as in the United Kingdom and the United States of America. However, both risk-based premiums and growing risk pose increasing difficulties for insurance to remain affordable. An empirical concept of affordability is required as the affordability of adaption strategies is an important concern for policymakers, yet such a concept is not often examined. Therefore, a robust metric with a commonly acceptable affordability threshold is required. A robust metric allows for a previously normative concept to be quantified in monetary terms, and in this way, the metric is rendered more suitable for integration into public policy debates. This paper investigates the degree to which risk-based flood insurance premiums are unaffordable in Europe. In addition, this paper compares the outcomes generated by three different definitions of unaffordability in order to investigate the most robust definition. In doing so, the residual income definition was found to be the least sensitive to changes in the threshold. While this paper focuses on Europe, the selected definition can be employed elsewhere in the world and across adaption measures in order to develop a common metric for indicating the potential unaffordability problem.

Suggested Citation

  • Paul Hudson, 2018. "A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(7), pages 1019-1038, October.
    • Handle: RePEc:spr:masfgc:v:23:y:2018:i:7:d:10.1007_s11027-017-9769-5
    DOI: 10.1007/s11027-017-9769-5
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    Cited by:

    1. Jiun-Huei Jang & Petr Vohnicky & Yen-Lien Kuo, 2021. "Improvement of Flood Risk Analysis Via Downscaling of Hazard and Vulnerability Maps," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 35(7), pages 2215-2230, May.
    2. Max Tesselaar & W. J. Wouter Botzen & Toon Haer & Paul Hudson & Timothy Tiggeloven & Jeroen C. J. H. Aerts, 2020. "Regional Inequalities in Flood Insurance Affordability and Uptake under Climate Change," Sustainability, MDPI, vol. 12(20), pages 1-30, October.
    3. Devendra Kumar Jain & Asif Chida & R. D. Pathak & Raghbendra Jha & Stephanie Russell, 2022. "Climate risk insurance in Pacific Small Island Developing States: possibilities, challenges and vulnerabilities—a comprehensive review," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(3), pages 1-21, March.

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