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Reflections on the Current Debate on How to Link Flood Insurance and Disaster Risk Reduction in the European Union

Author

Listed:
  • S. Surminski

    (The Grantham Research Institute on Climate Change and the Environment London School of Economics, London, United Kingdom)

  • J.C.J.H. Aerts

    (Institute for Environmental Studies, VU University Amsterdam, the Netherlands)

  • W.J.W. Botzen

    (Institute for Environmental Studies, VU University Amsterdam, the Netherlands)

  • P. Hudson

    (Institute for Environmental Studies, VU University Amsterdam, the Netherlands)

  • J. Mysiak

    (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici)

  • C. D. Pérez-Blanco

    (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici)

Abstract

Flood insurance differs widely in scope and form across Europe. Against the backdrop of rising flood losses a debate about the role of EU policy in shaping the future of this compensation tool is led by policy makers and industry. In this paper we investigate if and how current EU policies influence flood insurance. While the question of supply and demand is at the core of the debate, we argue that another key dimension is often overlooked: how to use insurance as a lever for risk reduction and prevention efforts. We investigate if and how current EU policies interplay with these two dimensions and then reflect on the national policy level, by illustrating two conflicting cases of flood insurance: the United Kingdom (UK), where flood insurance provision is widely available, but subject to current reform, and the Netherlands, where efforts to introduce flood insurance have only recently failed. In analysing the current positions on the role of the EU in shaping flood insurance we conclude that there is wide agreement that harmonisation of flood insurance offering across the EU is unlikely to be effective. We conclude that there is clear scope for the EU to play a greater role in linking risk transfer and prevention, beyond existing channels, to ensure an integrated approach to flood risk management across the EU.

Suggested Citation

  • S. Surminski & J.C.J.H. Aerts & W.J.W. Botzen & P. Hudson & J. Mysiak & C. D. Pérez-Blanco, 2015. "Reflections on the Current Debate on How to Link Flood Insurance and Disaster Risk Reduction in the European Union," Working Papers 2015.41, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2015.41
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    References listed on IDEAS

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    Cited by:

    1. W. J. Wouter Botzen & Érika Monteiro & Francisco Estrada & Giulia Pesaro & Scira Menoni, 2017. "Economic Assessment of Mitigating Damage of Flood Events: Cost–Benefit Analysis of Flood-Proofing Commercial Buildings in Umbria, Italy," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 585-608, October.
    2. Swenja Surminski & Paul Hudson, 2017. "Investigating the Risk Reduction Potential of Disaster Insurance Across Europe," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 247-274, April.
    3. Mol, Jantsje M. & Botzen, W. J. Wouter & Blasch, Julia E., 2020. "Risk reduction in compulsory disaster insurance: Experimental evidence on moral hazard and financial incentives," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    4. Toon Haer & W. J. Wouter Botzen & Hans de Moel & Jeroen C. J. H. Aerts, 2017. "Integrating Household Risk Mitigation Behavior in Flood Risk Analysis: An Agent‐Based Model Approach," Risk Analysis, John Wiley & Sons, vol. 37(10), pages 1977-1992, October.
    5. Surminski, Swenja, 2014. "The role of insurance in reducing direct risk: the case of flood insurance," LSE Research Online Documents on Economics 60764, London School of Economics and Political Science, LSE Library.
    6. Michael G. Faure & Kristel De Smedt, 2019. "Compensation for victims of disasters: a task for Europe?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 732-759, October.
    7. Swenja Surminski & Paul Hudson & Jeroen Aerts & Wouter Botzen & M.Conceição Colaço & Florence Crick & Jill Eldridge & Anna Lorant & António Macedo & Reinhard Mechler & Carlos Neto & Robin Nicolai & Di, 2015. "Novel and improved insurance instruments for risk reduction," GRI Working Papers 188, Grantham Research Institute on Climate Change and the Environment.
    8. Paul Hudson, 2020. "The Affordability of Flood Risk Property‐Level Adaptation Measures," Risk Analysis, John Wiley & Sons, vol. 40(6), pages 1151-1167, June.
    9. Unterberger, Christian & Hudson, Paul & Botzen, W.J. Wouter & Schroeer, Katharina & Steininger, Karl W., 2019. "Future Public Sector Flood Risk and Risk Sharing Arrangements: An Assessment for Austria," Ecological Economics, Elsevier, vol. 156(C), pages 153-163.
    10. Hudson, Paul & Botzen, W.J. Wouter & Feyen, Luc & Aerts, Jeroen C.J.H., 2016. "Incentivising flood risk adaptation through risk based insurance premiums: Trade-offs between affordability and risk reduction," Ecological Economics, Elsevier, vol. 125(C), pages 1-13.
    11. 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.

    More about this item

    Keywords

    Flood Insurance; Disaster Risk Reduction; Europe;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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