Filling the Evidence Gap: Physical and Mathematical Modelling of Leaky Barriers as Flood Risk Reduction Measures

Abstract. Insurance can be an important mechanism to stimulate flood risk reduction and thus decrease losses. However, there is a gap between the theoretical potential described by academic scholars and the actual engagement of insurers. In the analysis, I have collected examples of insurers' engagement in flood risk reduction, focusing on household and business insurance in developed countries. Insurers engaged either directly, e.g., through co-financing risk reduction, or more indirectly by giving incentives to policyholders or governmental actors to adopt risk reduction measures. I analyzed their engagement with the framing conditions of the market they were acting in, such as market penetration or private or public insurance schemes. I found risk reduction measures like awareness-raising campaigns targeting citizens to be quite common across several countries. There was less insurance engagement in risk reduction measures such as warning or land-use planning, which are perceived to be mainly governmental tasks. The use of risk-based pricing as an incentive for the adoption of risk reduction measures as suggested by academia is difficult in practice, due to barriers such as information gaps on the effectiveness of property-level protection measures and requirements concerning the affordability of insurance. New approaches to overcome these shortfalls include organized data collection on property-level protection measures or the insurance of high-risks for affordable premiums in public–private partnership constellations with the government.

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Social vulnerability in cost-benefit analysis for flood risk management

Environment and Development Economics ◽

10.1017/s1355770x19000275 ◽

2019 ◽

Vol 25 (2) ◽

pp. 115-134

Author(s):

Jarl Kind ◽

W. J. Wouter Botzen ◽

Jeroen C. J. H. Aerts

Keyword(s):

Social Welfare ◽

Risk Reduction ◽

Low Income ◽

Flood Risk ◽

Social Vulnerability ◽

Cost Benefit ◽

Financial Protection ◽

The Social ◽

Flood Risk Reduction ◽

Risk Reduction Measures

AbstractTraditional cost-benefit analyses (CBAs) of flood risk reduction measures usually ignore distributions of damages over populations, which disadvantages the poor. Instead, a CBA based on social welfare includes individual social vulnerability through relative impacts on consumption. If vulnerabilities are high, floods are catastrophic and cause poverty, migration or indirect deaths, and risk reductions have high social welfare values. For non-catastrophic risks, social welfare values of risks are relatively higher for vulnerable low-income households. We present a framework to integrate social vulnerability into CBAs, and show how financial protection reduces social flood vulnerability and provides welfare benefits. A case study illustrates that traditional CBAs underestimate the social welfare value of flood risk reduction measures, up to a factor of 30. Data on financial protection is however scarce, which hampers estimation of the social welfare value in practice. A solution is to increase financial protection of individuals, in addition to offering physical flood protection.

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