Adaptation to climate change in the insurance sector: examples from the UK, Germany and the Netherlands

Abstract

Adaptation to climate change, particularly flood risks, may come to pose large challenges in the future and will require cooperation among a range of stakeholders. However, there presently exists little research especially on the integration of the private sector in adaptation. In particular, recently developed state programs for adaptation have so far been focused on the public sector. Insurance providers may have much to contribute as they offer other parts of society services to appropriately identify, assess and reduce the financial impacts of climate change-induced risks. This study aims to explore how the institutional distribution of responsibility for flood risk is being renegotiated within the UK, Germany and Netherlands. Examining how the insurance industry and the public sector can coordinate their actions to promote climate change adaptation, the study discusses how layered natural hazard insurance systems may result from attempts to deal with increasing risks due to increasing incidences of extreme events and climate change. It illustrates that concerns over the risks from extreme natural events have prompted re-assessments of the current systems, with insurance requiring long-term legislative frameworks that defines the objectives and responsibilities of insurers and the different political authorities.

When is it beneficial for insurers to engage in climate change adaptation – a cross country comparison

“…Flood insurance can also be quasi-compulsory, meaning that the insurance itself is voluntary, but for example, needed for taking up a property mortgage (Smolka, 2006). To explore this, several scholars have carried out 15 comparative reviews of insurance systems in different countries (Bräuninger et al, 2011;Keskitalo et al, 2014;Lamond and Penning-Rowsell, 2014;Paudel, 2012;Porrini and Schwarze, 2014;Suykens et al, 2016).…”

“…Present studies have focused on which economic instruments can be used to incentivize adaptation (Bräuninger et al, 2011;Filatova, 2014), how the insurance system should be designed to support more adaptation (Kunreuther, 1996;Lamond and Penning-Rowsell, 2014;Michel-Kerjan and Kunreuther, 2011), how adaptation is or could 25 be considered in the recovery process Suykens et al, 2016), the distribution of responsibilities between insurers and the government (Keskitalo et al, 2014), and also recently on how policy and market factors hamper or support insurers engagement in promoting adaptation (Glaas et al, 2016;, or how in certain regions or countries current insurers contribute to climate change mitigation and adaptation (Johannsdottir et al, 2014;Poussin et al, 2013). This article takes a slightly different perspective by asking what the potential benefits for insurers would be to become directly 30 engaged in their policyholders or the public's adaptation activities or support adaptation activities.…”

Dealing with flood damages: will prevention, mitigation, and ex post compensation provide for a resilient triangle?

“…Insurers are hesitant to take into account measures requiring human interaction, especially with regard to already http://www.ecologyandsociety.org/vol21/iss4/art1/ existing buildings, whereas structural measures carried out at the time of construction are more commonly included in an insurer's risk assessment (telephone interview, insurance professional from the umbrella organization for insurers, 2015). This is one of the factors of uncertainty because it is often not clear how specific flood-proofing measures decrease the flood risks (Keskitalo et al 2014). Empirical evidence, not only in Belgium but also at a broader geographic scale, on if and how risk reduction measures are being taken and their level of effectiveness is lacking (Hudson et al 2016).…”

“…Our aim is to propose concrete recommendations on how synergies can be improved to provide a coherent FRM approach in which strategies reinforce and complement, rather than undermine, each other. Indeed, earlier comparative research has shown that the linkages between the ex post compensation schemes across the EU and preventing and mitigating flood (risks) have proved to be inadequate (see, e.g., Keskitalo et al 2014, Lamond and Penning-Rowsell 2014, Penning-Rowsell and Priest 2015, Hudson et al 2016). Diversification of FRM strategies, i.e., prevention, defense, mitigation, preparation, and recovery, is recognized as essential for robust and resilient flood governance arrangements (Hegger et al 2013) and is emphasized by the EU Floods Directive 2007/60/ EC (European Parliament, Council of the European Union 2007).…”

The Role of Insurance in Reducing Direct Risk - The Case of Flood Insurance

“…The situation in Germany has recently been investigated by Seifert et al (2013), Zahn and Neuss (2011) and Keskitalo et al, (2014).…”