The Demand for Index-Based Flood Insurance in a High-Income Country

Achtnicht, Martin; Osberghaus, Daniel

doi:10.1111/geer.12142

Cited by 5 publications

(2 citation statements)

References 68 publications

(97 reference statements)

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“…Compared to the urgent market demand, research on urban flood index insurance is still relatively scarce. Specifically, existing flood insurance-related research has focused on the demand for flood index insurance by potential insured persons [19,31]. Alternatively, index insurance is designed using actual flood loss data [32,33].…”

Section: Introductionmentioning

confidence: 99%

Urban Flood Loss Assessment and Index Insurance Compensation Estimation by Integrating Remote Sensing and Rainfall Multi-Source Data: A Case Study of the 2021 Henan Rainstorm

Zheng

Chen

et al. 2023

Sustainability

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To address the problems of traditional insurance compensation methods for flood losses, such as difficulty in determining losses, poor timeliness, a complicated compensation process and moral hazard, an urban flood index insurance tiered compensation model integrating remote sensing and rainfall multi-source data was proposed. This paper first extracted the area of water bodies using the Normalized Difference Water Index and estimates the urban flood area loss based on the flood loss model of remote sensing pixels. Second, the tiered compensation mechanism triggered by rainfall was determined, and the urban flood index insurance tiered compensation model was constructed using remote sensing and rainfall multi-source data. Finally, the economic losses and flood insurance compensation in urban flood were estimated. The results show that: (1) the geo-spatial distribution of flood-affected areas by remote sensing inversion is consistent with the actual rainfall characteristics of Henan Province, China; (2) based on the flood losses model of remote sensing pixels, the estimated flood losses for Henan Province are CNY 110.20 billion, which is consistent with the official data (accuracy ≥ 90%); and (3) the proposed model has good accuracy (R2 = 0.98, F = 1379.42, p < 0.05). The flood index insurance compensation in Henan Province is classified as a three-tier payout, with a total compensation of CNY 24,137 million. This paper can provide a new approach to estimate large-scale urban flood losses and the scientific design of flood index insurance products. It can also provide theoretical and technical support to many countries around the world, particularly those with underdeveloped flood insurance systems.

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Section: Introductionmentioning

confidence: 99%

Urban Flood Loss Assessment and Index Insurance Compensation Estimation by Integrating Remote Sensing and Rainfall Multi-Source Data: A Case Study of the 2021 Henan Rainstorm

Zheng

Chen

et al. 2023

Sustainability

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show abstract

“…Insurance works when risks are pooled and take up is high to counter adverse selection and moral hazard. Yet, in high-income countries, the uptake of flood insurance is low [20] and largely non-responsive to different products [21]. Meanwhile, access to flood insurance is poor in developing countries, and households and businesses here may have preferences for an uninsured status quo because of institutional trust issues [22].…”

Section: Introductionmentioning

confidence: 99%

Designing a Flood Storage Option on Agricultural Land: What Can Flood Risk Managers Learn from Drought Management?

Bark

2021

Water

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The increasing probability of loss and damage to floods is a global concern. Countries are united by an urgent need to reduce flood risk to households, businesses, agricultural land, and infrastructure. As natural and engineered protection erodes with climate change and development pressures, new approaches to flood risk management delivered at the catchment scale that work with nature hold promise. One nature-based solution that aligns with this Special Issue on river flooding is the temporary storage of floodwaters on the floodplain. In many countries, this would involve controlled flooding inland low-lying agricultural land. Designing schemes that farmers and irrigation districts will adopt is essential. To inform future floodplain storage options, we review farm-centred drought management, specifically, agreements that transfer agricultural water to municipalities through fallowing in California, USA and an Australian farm exit scheme. These initiatives reveal underpinning principles around the need to: balance the multiple objectives of the parties, share the benefits and responsibilities, address local impacts and practical guidance on incentive design including the consideration of conditional participation requirements and responding to farmer and public preferences. In terms of funding there is opportunity for blended financing with flood-prone communities, insurers, and conservation charities.

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Weather extremes, agriculture and the value of weather index insurance

Hott

Regner

2023

Geneva Risk Insur Rev

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This paper evaluates the potential value of a weather index insurance for the agriculture sector in an high income country (Germany). In our theoretical analysis we model an index insurance, a loss-based insurance market as well as a combination of both kinds of insurance and compare the resulting expected utility of a risk averse crop farmer. To find a suitable index, we conduct a panel estimation and evaluate the link between different weather variables and losses of crop farmers in Germany. Following our estimation, mean temperatures in summer have the highest potential for an valuable index insurance. Finally, we simulate the theoretical model using the results from the estimation and using different thresholds for the definition of a NatCat. According to this simulation, index-insurance is more attractive for the lower and more frequently occurring losses and loss-based insurance is more attractive for rare high losses. A combination of both kinds of insurance could be optimal for intermediate cases.

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The Demand for Index-Based Flood Insurance in a High-Income Country

Cited by 5 publications

References 68 publications

Urban Flood Loss Assessment and Index Insurance Compensation Estimation by Integrating Remote Sensing and Rainfall Multi-Source Data: A Case Study of the 2021 Henan Rainstorm

Urban Flood Loss Assessment and Index Insurance Compensation Estimation by Integrating Remote Sensing and Rainfall Multi-Source Data: A Case Study of the 2021 Henan Rainstorm

Designing a Flood Storage Option on Agricultural Land: What Can Flood Risk Managers Learn from Drought Management?

Weather extremes, agriculture and the value of weather index insurance

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