Promoting flood risk reduction: The role of insurance in Germany and England

Abstract

Improving society's ability to prepare for, respond to and recover from flooding requires integrated, anticipatory flood risk management (FRM). However, most countries still focus their efforts on responding to flooding events if and when they occur rather than addressing their current and future vulnerability to flooding. Flood insurance is one mechanism that could promote a more ex ante approach to risk by supporting risk reduction activities. This paper uses an adapted version of Easton's System Theory to investigate the role of insurance for FRM in Germany and England. We introduce an anticipatory FRM framework, which allows flood insurance to be considered as part of a broader policy field. We analyze if and how flood insurance can catalyze a change toward a more anticipatory approach to FRM. In particular we consider insurance's role in influencing five key components of anticipatory FRM: risk knowledge, prevention through better planning, property‐level protection measures, structural protection and preparedness (for response). We find that in both countries FRM is still a reactive, event‐driven process, while anticipatory FRM remains underdeveloped. Collaboration between insurers and FRM decision‐makers has already been successful, for example in improving risk knowledge and awareness, while in other areas insurance acts as a disincentive for more risk reduction action. In both countries there is evidence that insurance can play a significant role in encouraging anticipatory FRM, but this remains underutilized. Effective collaboration between insurers and government should not be seen as a cost, but as an investment to secure future insurability through flood resilience.

Determinants of Probability Neglect and Risk Attitudes for Disaster Risk: An Online Experimental Study of Flood Insurance Demand among Homeowners

“…Information campaigns about the importance of insurance against flood risks may overcome these difficulties. For instance, the German Insurance Association has implemented risk awareness campaigns to increase flood insurance penetration, the first of which was launched in Bavaria in 2009 following the destructive flood that hit the region in 2005 (Surminski & Thieken, 2017).…”

Fit for Purpose and Fit for the Future? An Evaluation of the UK's New Flood Reinsurance Pool

“…Flood Re, government and industry now need to explore how to support this transition. This would require a clear commitment to risk reduction and flood resilience, recognizing that this is the only viable way to ensure future insurability of these risks (Surminski and Thieken, 2017; see also Ermoliev et al, 2000, for an earlier investigation of this).…”

Insurance engagement in flood risk reduction – examples from household and business insurance in developed countries

“…Overview of insurance schemes and flood insurance conditions for household and business insurance in several countries, depicting the range from public to private insurance schemes. (Information in this table was derived from Atreya et al, 2015;Den et al, 2017;Guillier, 2017;Hanger et al, 2018;Kousky, 2017;Kousky et al, 2016;Surminski and Eldridge, 2015;Surminski and Thieken, 2017 Flood insurance schemes in developed countries vary considerably (see Table 1) with respect to who provides insurance, the degree of government involvement and cooperation with insurers, legal requirements, the availability and demand for insurance, whether insurance is compulsory or voluntary, the design of insurance products, and the insurance market penetration (Atreya et al, 2015;Bouwer et al, 2007;Den et al, 2017;Johannsdottir, 2017;Lamond and Penning-Rowsell, 2014;Porrini and Schwarze, 2014;Suykens et al, 2016). These framing conditions for insurance businesses are due not only to a country's over-all flood risk (Feyen et al, 2012), but also historic developments of insurance schemes and national societal preferences of how disaster losses should be shared.…”

“…There is a small but steadily growing body of literature that examines certain aspects of this issue. Present studies have focused on which economic instruments can be used to incentivize prevention (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 prevention is or could be considered in the recovery process Suykens et al, 2016), the distribution of responsibilities between insurers and the government (Keskitalo et al, 2014), how policy and market factors hamper or support insurers' engagement in flood risk adaptation (Glaas et al, 2016;, and recently also how insurers are engaged in flood risk reduction in certain countries (Den et al, 2017;Poussin et al, 2013;Surminski, 2014;Surminski and Hudson, 2017;Surminski and Thieken, 2017). Nevertheless, it still remains unclear to what extent insurance can be used to boost flood risk reduction (Surminski, 2014), for what types of flood risk reduction measures can be used, and what the incentivizing mechanisms insurers currently use or could use are (Atreya et al, 2015).…”