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The Effects of Subsidized Flood Insurance on Real Estate Markets

Author

Listed:
  • Garbarino, Nicola

    (Ludwig Maximilian University of Munich and Ifo Institute for Economic Research)

  • Guin, Benjamin

    (Bank of England)

  • Lee, Jonathan

    (University of Glasgow)

Abstract

Subsidised insurance against extreme weather events improves its affordability among households in high-risk areas but it can weaken the risk signal via property prices. Leveraging a granular data set of all property transactions and flooding in England, we study the effects of a reinsurance scheme which lowers insurance premiums for at-risk properties. We document that the introduction of this scheme increases prices and transaction volumes of flood-prone properties. This fully offsets the negative direct effects of flooding on property prices, with high-income areas and high-value properties benefiting relatively more. Our findings speak to the debate on transition risk and wealth redistribution in response to public interventions addressing climate change.

Suggested Citation

  • Garbarino, Nicola & Guin, Benjamin & Lee, Jonathan, 2022. "The Effects of Subsidized Flood Insurance on Real Estate Markets," Bank of England working papers 995, Bank of England.
    • Handle: RePEc:boe:boeewp:0995
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    Cited by:

    1. Fetzer, Thiemo, 2023. "Regulatory barriers to climate action: evidence from conservation areas in England," CAGE Online Working Paper Series 654, Competitive Advantage in the Global Economy (CAGE).

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    More about this item

    Keywords

    House prices; flood risk; flood insurance; climate risks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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