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Reflections on the current debate on how to link flood insurance and disaster risk reduction in the European Union

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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 mechanism is led by policy-makers and industry. 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 whether and how current EU policies influence flood insurance and how this interplays with the national policy level. First, we consider affordability, availability, and risk reduction linkages in an EU context, and then gather insights from two contrasting cases of flood insurance: the UK, where flood insurance provision is widely available, but subject to ongoing reform; and the Netherlands, where several efforts to introduce broader flood insurance coverage have failed. This is followed by an analysis of how EU policy could help address the challenges at member state level, based on a stakeholder workshop discussion. We conclude that there is wide agreement that a complete harmonization of flood insurance offering across the EU is unlikely to be effective. However, there is clear scope for EU policymakers 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.

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Notes

  1. Public–private partnerships (PPP) are schemes that are undertaken with a contractual agreement between a public body and a private sector company. The private sector company then assumes a specific role to achieve a particular outcome, while the public body offers the degree of support as defined in the contract. PPPs can cover aspects such as risk information sharing—see HORA in Austria—as well as other aspects, including land-use arrangements (ClimateWise 2012).

  2. Länder refers to the 16 federal states in Germany.

  3. Except the road freight transport sector for which the ceiling is €100,000.

  4. The initial ceiling (1 billion Euro) up to which the EUSF can be mobilized was stipulated in nominal values, whereas under the 2014–2020 Multiannual Financial Framework (MFF) the ceiling (500 million Euro) is expressed in 2011 prices and amounts to 541 million in current/2015 prices.

  5. Including infrastructure restoration in the fields of energy, water and waste water, telecommunications, transport, health and education; temporary accommodation and rescue services; preventive infrastructure and measures of protection of cultural heritage; and cleaning up disaster-stricken areas, including natural zones.

  6. Over the previous four-year spending review period (2007/8–2010/11), the government have allocated £2.562bn to flood and coastal defence, and in the current spending period (2011/12–2014/15), the government have allocated £2.315bn. These figures are priced in real terms at based on 2012/13 prices.

  7. This is also considered to be the case outside of the workshop see, for example, EXCIMPA (2007); Climate Wise (2012).

  8. One example is FEMA in the USA. FEMA aims to oversee flood risk management via the National Flood Insurance Program (NFIP). Participation in the NFIP requires a community to undertake a minimum level of floodplain management, which contributes to DRR. The NFIP’s mitigation activities have been able to reduce the losses suffered on average by a household (Leichenko 2011). However, the actual uptake of insurance is rather low as was the ability of FEMA to restrain development in floodplains, while FEMA has limited resources to improve flood risk management in the entire USA (Michel-Kerjan 2010; Michel-Kerjan et al. 2014). Moreover, improving sustainability of the NFIP in the light of increasing flood losses may be difficult due to the need to involve political action. Recent attempts to promote DRR by better differentiating flood insurance premiums according to risk, in part, have been rejected for political rather than risk management reasons relating to a potentially large increase in premiums.

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Acknowledgments

This paper has been produced under the research project ENHANCE (Enhancing risk management partnerships for catastrophic natural disasters in Europe), funded by the European Commission under the Seventh Framework Programme—Grant agreement no. 308438. The authors acknowledge the funding received by the three participating institutions (LSE, FEEM and IVM) through this grant. The authors would also like to acknowledge the input provided by participants at the ENHANCE flood insurance workshop, hosted by Munich Re in December 2013.

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Authors and Affiliations

  1. The Grantham Research Institute on Climate Change and the Environment, London School of Economics, London, UK

    S. Surminski

  2. Institute for Environmental Studies, VU University Amsterdam, Amsterdam, The Netherlands

    J. C. J. H. Aerts, W. J. W. Botzen & P. Hudson

  3. Fondazione Eni Enrico Mattei (FEEM), Isola di San Giorgio Maggiore, 30124, Venice, Italy

    J. Mysiak & C. D. Pérez-Blanco

  4. Divisione RAAS, Centro Euro-Mediterraneo sui Cambiamenti Climatici, Isola di San Giorgio Maggiore, 8, 30124, Venice, Italy

    J. Mysiak & C. D. Pérez-Blanco

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Appendix

Appendix

Policy

Alexander Ferstel

EU-DG CLIMA

Marco Gemmer

EU-DG Research

Stefanie Dannenmann-Di Palma

United Nations Office for Disaster Risk Reduction (UNISDR)

Industry

Benno Keller

Zurich Insurance Company, Switzerland

Markus Aichinger

Allianz

Thomas Hlatky

Austrian Insurance Association/Insurance Europe

Roland Nussbaum

French Insurance Association (Mission Risques Naturels)

Oliver Hauner

German Insurance Association

Delioma Oramas-Dorta

Guy Carpenter

Carmen Bell

Insurance Europe

Eberhart Faust

Munich Re

Jan Eichner

Munich Re

Michael Roth

Munich Re

Peter Hoeppe

Munich Re

Wolfgang Kron

Munich Re

Katherine Today

ClimateWise

Timothy Fewtrell

Willis

Carlos Amaral Netto

Metacortex

Gijs Kloek

Achmea Reinsurance, Netherlands

Academia

Diane Horn

Birkbeck, University of London UK

Franz Prettenthaler

Joanneum Research, Austria

Swenja Surminski

LSE

Jim Hall

University of Oxford

Reinhard Mechler

IIASA

Dionisto Perez

FEEM

Jeroen Aerts

VU University Amsterdam

Wouter Botzen

VU University Amsterdam

Brenden Jongman

VU University Amsterdam

Paul Hudson

VU University Amsterdam

Joanne Linnerooth-Bayer

IIASA

Anna Lorant

IIASA

Wang Run

Chinese Academy of Sciences

Jiang Tong

National Climate Centre of China Meteorological

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Surminski, S., Aerts, J.C.J.H., Botzen, W.J.W. et al. Reflections on the current debate on how to link flood insurance and disaster risk reduction in the European Union. Nat Hazards 79, 1451–1479 (2015). https://doi.org/10.1007/s11069-015-1832-5

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