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Insurance Market Response to Flood Hazards: Empirical Evidence from the Housing Market

Author

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  • Carolin Pommeranz
  • Bertram I. Steininger

Abstract

Higher property losses due to flooding events represent an increasingchallenge to the global insurance sector. This study aims at identifying theimpact of flood hazard location on property prices and evaluates the floodrisk perception of potential homeowners. We utilize insurance-basedgeographical information system (GIS) data for flood zone identification andresidential property offering records from Dresden, Germany to run aspatial Durbin model. Results indicate that homeowners are almostinformed about costs for sufficient flood insurance coverage and premiumsare capitalized into the residential property market since location within aflood risk area lowers offering prices for houses by 26%. However, forcondominiums within a flood-prone area the price discount is only 3%.Furthermore, price discounts exceed capitalized insurance premiums due tonon-monetary losses that cannot be covered by insurance.

Suggested Citation

  • Carolin Pommeranz & Bertram I. Steininger, 2016. "Insurance Market Response to Flood Hazards: Empirical Evidence from the Housing Market," ERES eres2016_195, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2016_195
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2016-195
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    Cited by:

    1. Sophie Häse & Georg Hirte, 2023. "The impact of unexpected flood events and adaption measures on lot prices [Die Auswirkungen von unerwarteten Hochwasserereignissen und Anpassungsmaßnahmen auf Grundstückspreise]," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 43(1), pages 29-68, April.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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