Natural Hazards

, Volume 79, Issue 3, pp 1451–1479 | Cite as

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

  • S. SurminskiEmail author
  • J. C. J. H. Aerts
  • W. J. W. Botzen
  • P. Hudson
  • J. Mysiak
  • C. D. Pérez-Blanco
Original Paper


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.


Flood insurance Flood risk management Disaster risk reduction Europe 



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.


  1. ABI (2008) ABI/Government statement on flooding and insurance for England. Association of British Insurers. Accessed 17 June 2014
  2. ABI (2010) Massive rise in Britain’s flood damage bill highlights the need for more help for flood vulnerable communities says the ABI, ABI News Release. Association of British Insurers. Accessed 30 July 2013
  3. ABI (2012) UK insurance key facts—September 2012. Association of British Insurers. Accessed 30 July 2013
  4. ACM (2013) Informele zienswijze verplichte private verzekeringsconstructie voor overstromingsdekkingen. Autoriteit Consument & Markt. Accessed 25 April 2014
  5. Aerts JCJH, Botzen WJ (2011) Climate change impacts on long-term flood risk and insurance: a comprehensive study for The Netherlands. Glob Environ Change 21:1045–1060. doi: 10.1016/j.gloenvcha.2011.04.005 CrossRefGoogle Scholar
  6. ASC (2012) Climate change—is the UK preparing for flooding and water scarcity? Adaptation Sub-Committee Progress Report 2012. Committee on Climate Change. Accessed 30 July 2013
  7. Bek M, Bugra A, Hjalmarsson J, Lista A (2013) Future availability of flood insurance in UK: a report on legal aspects of the solutions adopted in Australia, Iceland, the Netherlands, New Zealand and Turkey, with conclusions. University of Southampton. Accessed 19 February 2014
  8. Botzen WJW, van den Bergh JCJM (2008) Insurance against climate change and flooding in the Netherlands: present, future, and comparison with other countries. Risk Anal 28(2):413–426CrossRefGoogle Scholar
  9. Botzen WJW, van den Bergh JCJM (2012a) Risk attitudes to low-probability climate change risks: WTP for flood insurance. J Econ Behav Organ 82(1):151–166CrossRefGoogle Scholar
  10. Botzen WJW, van den Bergh JCJM (2012b) Monetary valuation of insurance against flood risk under climate change. Int Econ Rev 53(3):1005–1025CrossRefGoogle Scholar
  11. Botzen WJW, Aerts JCJH, van den Bergh JCJM (2009) Willingness of homeowners to mitigate climate risk through insurance. Ecol Econ 68(8–9):2265–2277CrossRefGoogle Scholar
  12. Botzen WJW, van den Bergh JCJM, Bouwer LM (2010) Climate change and increased risk for the insurance sector: a global perspective and an assessment for the Netherlands. Nat Hazards 52(3):577–598CrossRefGoogle Scholar
  13. Bouwer LM, Huitema D, Aerts JCJH (2007) Adaptive flood management: the role of insurance and compensation in Europe, Report of the NeWater project. Institute for Environmental Studies, VU University. Accessed 25 April 2014
  14. Bozzola M (2014) Hedging against extreme events: crop insurance as a strategy to adapt to climate change. J Agric Econ (in press)Google Scholar
  15. Browne MJ, Hoyt RE (2000) The demand for flood insurance: empirical evidence. J Risk Uncertain 20(3):291–306CrossRefGoogle Scholar
  16. ClimateWise (2012) Adapting to the extreme weather impacts of climate change—how can the insurance industry help?
  17. Cowan V (2014) The future of flooding. Post Mag pp 28–30Google Scholar
  18. Crichton D (2008) Role of insurance in reducing flood risk. Geneva Pap 33:117–132Google Scholar
  19. de Moel H, Aerts JCJH, Koomen E (2011) Development of flood exposure in the Netherlands during the 20th and 21st century. Glob Environ Change 21(2):620–627CrossRefGoogle Scholar
  20. Defra (2011) Flood risk and insurance: a roadmap to 2013 and beyond final report of the flood insurance working groups PB 13684. Department for Environment, Food and Rural Affairs. Accessed 25 April 2014
  21. Defra (2013) Water bill—flood insurance (Flood Re): finance and accountability. Department for Environment, Food and Rural Affairs LondonGoogle Scholar
  22. Defra and ABI (2013) Flood re proposal: memorandum of understanding. Department for Environment, Food and Rural Affairs and the Association of British Insurers. Accessed 8 July 2013
  23. Dutch Consumer Association (2012) Catastrofeverzekering: review. Consumentenbond. Accessed 25 April 2014
  24. EC (2000) Directive 2000/60/EC of the European Parliament and of the Council establishing a framework for the Community action in the field of water policy (EU Water Framework Directive). European Commission StrasbourgGoogle Scholar
  25. EC (2007) Flood directive 2007/60/EC Council Directive. Directive 2007/60/EC of the European Parliament and of the Council of 23 October 2007 on the assessment and management of flood risks. European Commission. Accessed 25 April 2014
  26. EC (2009) Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Directive. European Commission StrasbourgGoogle Scholar
  27. EC (2012) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions EU State Aid Modernisation (SAM). COM(2012) 209 final. European Commission StrasbourgGoogle Scholar
  28. EC (2013a) Green paper on the insurance of natural and man-made disasters (Communication No. COM(2013) 213 final). European Commission StrasbourgGoogle Scholar
  29. EC (2013b) Commission regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid. Off. J. Eur. Union L352, 1–8. European Commission StrasbourgGoogle Scholar
  30. EC (2013c) Decision No 1313/2013/EU of the European Parliament and of the Council of 17 December 2013 on a Union Civil Protection Mechanism. Off J Eur Union 924–947Google Scholar
  31. EC (2014) Commission regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty. Off. J. Eur. Union L187, 1–87. European Commission StrasbourgGoogle Scholar
  32. EFRA (2009) Environment, food and rural affairs committee—sixth report the draft flood and water management bill. House of Commons. Accessed 25 April 2014
  33. EP (European Parliament) (2014) On the insurance of natural and man-made disasters (Report No. 2013/2174(INI)). EU Parliament: Brussels and StrasbourgGoogle Scholar
  34. EU Council (2002) Council regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund. Off J Eur CommunitiesGoogle Scholar
  35. EXCIMPA (2007) Handbook on good practices for flood mapping in Europe.
  36. Falco SD, Adinolfi F, Bozzola M, Capitanio F (2014) Crop insurance as a strategy for adapting to climate change. J Agric Econ 65(2):485–504Google Scholar
  37. Garrick D, Whitten SM, Coggan A (2013) Understanding the evolution and performance of water markets and allocation policy: a transaction costs analysis framework. Ecol Econ 88:195–205CrossRefGoogle Scholar
  38. Ghesquiere F, Mahul O (2007) Sovereign natural disaster insurance for developing countries: a paradigm shift in catastrophe risk financing policy research working paper 4345. World Bank, WashingtonGoogle Scholar
  39. HM Parliament (2014) Environment, food and rural affairs flood control. 15 Jan 2014: Column 603 W. Accessed 12 February 2014
  40. Hung HC (2009) The attitude towards flood insurance purchase when respondents’ preferences are uncertain: a fuzzy utility approach. J Risk Res 12(2):239–258CrossRefGoogle Scholar
  41. ICC (2014) Insurance compensation consortium. Insurance compensation consortium. Accessed 2 February 2014
  42. IPCC (2012) Managing the risks of extreme events and disasters to advance climate change adaptation. A special report of working groups i and ii of the intergovernmental panel on climate change. In: Field CB, Barros V, Stocker TF, Qin D, Dokken DJ, Ebi KL, Mastrandrea MD, Mach KJ, Plattner GK, Allen SK, Tignor M, Midgley PM (eds). Cambridge University Press, CambridgeGoogle Scholar
  43. Jongejan R, Barrieu P (2008) Insuring large-scale floods in the Netherlands. Geneva Pap Risk Insur 33(2):250–268CrossRefGoogle Scholar
  44. Jongman B, Hochrainer-Stigler S, Feyen L, Aerts JCJH, Mechler R, Wouter Botzen WJ, Bouwer LM, Pflug G, Rojas R, Ward PJ (2014) Increasing stress on disaster-risk finance due to large flood. Nat Clim Change 4:264–268CrossRefGoogle Scholar
  45. Kabat P, Van Vierssen W, Veraart J, Vellinga P, Aerts J (2005) Climate proofing the Netherlands. Nature 438(7066):283–284CrossRefGoogle Scholar
  46. Kind J (2013) Economically efficient flood protection standards for the Netherlands. J Flood Risk Manag (early view online)Google Scholar
  47. Kunreuther H (1996) Mitigating disaster losses through insurance. J Risk Uncertain 12:18–171CrossRefGoogle Scholar
  48. Kunreuther HC, Michel-Kerjan EO, Doherty NA, Grace MF, Klein RW, Pauly MV (2011) At war with the weather: managing large-scale risks in a new era of catastrophes, Paperback edition. The MIT Press, CambridgeGoogle Scholar
  49. Leichenko A (2011) Adaptation through insurance: lessons from the NFIP. Int J Clim Change Strateg Manag 3(3):250–263CrossRefGoogle Scholar
  50. Maccaferri S, Carboni J, Campolongo F (2012) Natural catastrophes: risk relevance and insurance coverage in the EU (EUR—Scientific and Technical Reports No. JRC67329. Joint Research Centre, Ispra, ItalyGoogle Scholar
  51. Melecky M, Raddatz C (2011) How do governments respond after catastrophes? Natural-disaster shocks and the fiscal stance. policy research working paper series 3503. World Bank, WashingtonGoogle Scholar
  52. Michel-Kerjan EO (2010) Catastrophe economics: the National Flood Insurance Program. J Econ Perspect 24(4):165–186CrossRefGoogle Scholar
  53. Mysiak J, Amadio M, Santato S, Carrera L, Maziotis A (2013) Economic policy instruments for flood risk reduction. Report of the EPI-WATER projectGoogle Scholar
  54. Michel-Kerjan E, Czajkowski J, Kunreuther H (2014) Could flood insurance be privatised in the United States? A primer, The Geneva Papers, 00, 1-30weGoogle Scholar
  55. OJ (2012) Procedures relating to the implementation of competition policy. Off J Eur UnionGoogle Scholar
  56. Paudel Y, Botzen WJW, Aerts JCJH (2012) A comparative study of public-private catastrophe insurance systems: lessons from current practices. Gen Pap Risk Insur 37:257–285CrossRefGoogle Scholar
  57. Paudel Y, Botzen WJW, Aerts JCJH (2013) Estimation of insurance premiums for coverage against natural disaster risk: an application of Bayesian Inference. Nat Hazards Earth Syst Sci 13:1–18CrossRefGoogle Scholar
  58. Paudel Y, Botzen WJW, Aerts JCJH, Dijkstra TK (2014) Risk allocation in a public–private catastrophe insurance system: an actuarial analysis of deductibles, stop-loss, and premiums. J Flood Risk Manag (early view online)Google Scholar
  59. Paudel Y, Botzen WJW, Aerts JCJH (2015) Influence of climate change scenarios on catastrophe insurance: a case study of flood risk in the Netherlands. Reg Environ Change 1–13Google Scholar
  60. Poussin JK, Botzen WJW, Aerts JCJH (2013) Stimulating flood damage mitigation through insurance: an assessment of the French CatNat system. Environ Hazards 12:258–277CrossRefGoogle Scholar
  61. Ranger N, Surminski S, Silver N (2011) Open questions about how to address ‘loss and damage’ from climate change in the most vulnerable countries: a response to the Cancún Adaptation Framework Policy paper. In: Centre for Climate Change Economics and Policy Grantham Research Institute on Climate Change and the Environment LondonGoogle Scholar
  62. Raschky PA, Weck-Hannemann H (2007) Charity hazard—a real hazard to natural disaster insurance? Environ Hazards 7:321–329CrossRefGoogle Scholar
  63. Rojas R, Feyen L, Watkiss P (2013) Climate change and river floods in the European Union: socio-economic consequences and the costs and benefits of adaptation. Glob Environ Change 23(6):1737–1751Google Scholar
  64. Schwarze R, Wagner GG (2007) The political economy of natural disaster insurance: lessons from the failure of a proposed compulsory insurance scheme in Germany. Eur Environ 17:403–415CrossRefGoogle Scholar
  65. Schwarze R, Schwindt M, Weck-Hannemann H, Raschky P, Zahn F, Wagner GG (2011) Natural hazard insurance in Europe: tailored responses to climate change are needed. Environ Policy Gov 21(1):14–30CrossRefGoogle Scholar
  66. Shilling JD, Sirmans CF, Benjamin JD (1989) Flood insurance, wealth redistribution, and urban property values. J Urban Econ 26:43–53CrossRefGoogle Scholar
  67. Sugarman SD (2006) Roles of government in compensating disaster victims. Berkeley Electron Press, BerkeleyGoogle Scholar
  68. Surminski S (2013) The role of insurance risk transfer in encouraging climate investment in developing countries. In: Dupuy PM, Viñuales JE (eds) Harnessing foreign investment to promote environmental protection. Cambridge University Press, Cambridge, pp 228–250CrossRefGoogle Scholar
  69. Surminski S, Eldridge J (2015). Flood insurance in England–an assessment of the current and newly proposed insurance scheme in the context of rising flood risk. J Flood Risk Manag (in press)Google Scholar
  70. Terpstra T (2009) Flood preparedness: thoughts, feelings and intentions of the Dutch public. Ph.D. thesis. University of Twente, EnschedeGoogle Scholar
  71. Treby EJ, Clark MJ, Priest SJ (2006) Confronting flood risk: implications for insurance and risk transfer. J Environ Manag 81(4):351–359CrossRefGoogle Scholar
  72. UNISDR (2012) Number of climate-related disasters around the world (1980–2011). United National International Strategy for Disaster Reduction. Accessed 1 Feb 2014
  73. Ungvári G, Kis A, Kaderják P, Keszthelyi A, Mezősi A, Kerekes L, Vollaro M (2013) Floods and water logging in the Tisza River Basin (Hungary). Report of the EPI-WATER project.
  74. von Peter G, von Dahlen S, Saxena S (2012) Unmitigated disasters? New evidence on the macroeconomic cost of natural catastrophes BIS Working Papers, no 394. Bank for International Settlements. Basel SwitzerlandGoogle Scholar
  75. von Ungern-Sternberg T (2004) Efficient monopolies: the limits of competition in the European property insurance market. Oxford University Press, OxfordCrossRefGoogle Scholar
  76. Warner K, Ranger N, Surminski S, Arnold M, Linnerooth-Bayer J, Michel-Kerjan Kovacs P, Herweijer C (2009) Adaptation to climate change: linking disaster risk reduction and insurance. United Nations International Strategy for Disaster Reduction, GenevaGoogle Scholar
  77. Wheater HS (2006) Flood hazard and management: a UK perspective. Philos Trans R Soc A 364(1845):2135–2145CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • S. Surminski
    • 1
    Email author
  • J. C. J. H. Aerts
    • 2
  • W. J. W. Botzen
    • 2
  • P. Hudson
    • 2
  • J. Mysiak
    • 3
    • 4
  • C. D. Pérez-Blanco
    • 3
    • 4
  1. 1.The Grantham Research Institute on Climate Change and the EnvironmentLondon School of EconomicsLondonUK
  2. 2.Institute for Environmental StudiesVU University AmsterdamAmsterdamThe Netherlands
  3. 3.Fondazione Eni Enrico Mattei (FEEM)VeniceItaly
  4. 4.Divisione RAASCentro Euro-Mediterraneo sui Cambiamenti ClimaticiVeniceItaly

Personalised recommendations