A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe

2017 ◽  
Vol 23 (7) ◽  
pp. 1019-1038 ◽  
Author(s):  
Paul Hudson
Keyword(s):  
Flood Risk ◽  
Flood Insurance ◽  
Insurance Premiums ◽  
Future Risk

scholarly journals Impacts of Climate Change and Remote Natural Catastrophes on EU Flood Insurance Markets: An Analysis of Soft and Hard Reinsurance Markets for Flood Coverage

Atmosphere ◽  
2020 ◽  
Vol 11 (2) ◽  
pp. 146 ◽  
Author(s):  
Max Tesselaar ◽  
W. J. Wouter Botzen ◽  
Jeroen C.J.H. Aerts
Keyword(s):  
Climate Change ◽  
Natural Disaster ◽  
Capital Market ◽  
Flood Risk ◽  
Change Scenario ◽  
Flood Insurance ◽  
Market Conditions ◽  
Insurance Premiums ◽  
Natural Catastrophes ◽  
Reinsurance Market

The increasing frequency and severity of natural catastrophes due to climate change is expected to cause higher natural disaster losses in the future. Reinsurance companies bear a large share of this risk in the form of excess-of-loss coverage, where they underwrite the most extreme portion of insurers’ risk portfolios. Past experience has shown that after a very large natural disaster, or multiple disasters in close succession, the recapitalization need of reinsurers could trigger a “hard” reinsurance capital market, where a high demand for capital increases the price charged by investors, which is opposed to a “soft” market, where there is a high availability of capital for reinsurers. Consequently, the rising costs of underwriting are transferred to insurers, which ultimately could trigger higher premiums for natural catastrophe (NatCat) insurance worldwide. Here, we study the vulnerability of riverine flood insurance systems in the EU to global reinsurance market conditions and climate change. To do so, we apply the “Dynamic Integrated Flood Insurance” (DIFI) model, and compare insurance premiums, unaffordability, and the uptake for soft and hard reinsurance market conditions under an average and extreme scenario of climate change. We find that a rising average and higher variance of flood risk towards the end of the century can increase flood insurance premiums and cause higher premium volatility resulting from global reinsurance market conditions. Under a “mild” scenario of climate change, the projected yearly premiums for EU countries, combined, are €1380 higher under a hard compared to a soft reinsurance capital market in 2080. For a high-end climate change scenario, this difference becomes €3220. The rise in premiums causes problems with the unaffordability of flood coverage and results in a declining demand for flood insurance, which increases the financial vulnerability of households to flooding. A proposed solution is to introduce government reinsurance for flood risk, as governments can often provide cheaper reinsurance coverage and are less subject to the volatility of the capital markets.

Hemodialysis Clinics in Flood Zones: A Case Study of Hurricane Harvey

2021 ◽  
pp. 1-6
Author(s):  
Rebecca Kaiser ◽  
Ibraheem M. Karaye ◽  
Temitope Olokunlade ◽  
Tracy Anne Hammond ◽  
Daniel W. Goldberg ◽  
...  
Keyword(s):  
High Risk ◽  
Emergency Management ◽  
Flood Risk ◽  
Federal Emergency Management Agency ◽  
Flood Insurance ◽  
Harris County ◽  
Management Agency ◽  
Flood Zone ◽  
Insurance Rate

Abstract Introduction: Hurricane Harvey (2017) forced the closure of hemodialysis centers across Harris County, Texas (USA) disrupting the provision of dialysis services. This study aims to estimate the percentage of hemodialysis clinics flooded after Harvey, to identify the proportion of such clinics located in high-risk flood zones, and to assess the sensitivity of the Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps (FIRMs) for estimation of flood risk. Methods: Data on 124 hemodialysis clinics in Harris County were extracted from Medicare.gov and geocoded using ArcGIS Online. The FIRMs were overlaid to identify the flood zone designation of each hemodialysis clinic. Results: Twenty-one percent (26 of 124) of hemodialysis clinics in Harris County flooded after Harvey. Of the flooded clinics, 57.7% were in a high-risk flood zone, 30.8% were within 1km of a high-risk flood zone, and 11.5% were not in or near a high-risk flood zone. The FIRMs had a sensitivity of 58%, misidentifying 42% (11 of 26) of the clinics flooded. Conclusion: Hurricanes are associated with severe disruptions of medical services, including hemodialysis. With one-quarter of Harris County in the 100-year floodplain, projected increases in the frequency and severity of disasters, and inadequate updates of flood zone designation maps, the implementation of new regulations that address the development of hemodialysis facilities in high-risk flood areas should be considered.

scholarly journals Regional Inequalities in Flood Insurance Affordability and Uptake under Climate Change

2020 ◽  
Vol 12 (20) ◽  
pp. 8734
Author(s):  
Max Tesselaar ◽  
W. J. Wouter Botzen ◽  
Toon Haer ◽  
Paul Hudson ◽  
Timothy Tiggeloven ◽  
...  
Keyword(s):  
Climate Change ◽  
Low Income ◽  
Flood Risk ◽  
Economic Change ◽  
Insurance Coverage ◽  
Tipping Point ◽  
Change Scenario ◽  
Flood Insurance ◽  
Insurance Premiums ◽  
Regional Inequalities

Flood insurance coverage can enhance financial resilience of households to changing flood risk caused by climate change. However, income inequalities imply that not all households can afford flood insurance. The uptake of flood insurance in voluntary markets may decline when flood risk increases as a result of climate change. This increase in flood risk may cause substantially higher risk-based insurance premiums, reduce the willingness to purchase flood insurance, and worsen problems with the unaffordability of coverage for low-income households. A socio-economic tipping-point can occur when the functioning of a formal flood insurance system is hampered by diminishing demand for coverage. In this study, we examine whether such a tipping-point can occur in Europe for current flood insurance systems under different trends in future flood risk caused by climate and socio-economic change. This analysis gives insights into regional inequalities concerning the ability to continue to use flood insurance as an instrument to adapt to changing flood risk. For this study, we adapt the “Dynamic Integrated Flood and Insurance” (DIFI) model by integrating new flood risk simulations in the model that enable examining impacts from various scenarios of climate and socio-economic change on flood insurance premiums and consumer demand. Our results show rising unaffordability and declining demand for flood insurance across scenarios towards 2080. Under a high climate change scenario, simulations show the occurrence of a socio-economic tipping-point in several regions, where insurance uptake almost disappears. A tipping-point and related inequalities in the ability to use flood insurance as an adaptation instrument can be mitigated by introducing reforms of flood insurance arrangements.

Impacts of Climate Change and Remote Natural Catastrophes on EU Flood Insurance Markets

2020 ◽  
Author(s):  
Max Tesselaar ◽  
W. J. Wouter Botzen ◽  
Jeroen C. J. H. Aerts
Keyword(s):  
Climate Change ◽  
High Risk ◽  
Flood Risk ◽  
Insurance Coverage ◽  
Flood Insurance ◽  
Insurance Premiums ◽  
Risk Areas ◽  
The Impact ◽  
Reinsurance Market ◽  
The Eu

<p>Flood insurance coverage can enhance financial resilience of households to changing flood risk caused by climate change. However, due to increasing risk in many areas, premiums are likely to rise, which may cause insurance to become unaffordable for low-income households. This issue can become especially prominent in high-risk areas, when premiums are risk-reflective. Consequently, increasing premiums can reduce the demand for insurance coverage when this is optional, as individuals often underestimate the flood risk they face. After a flood, uninsured households then have to rely on private savings or ex-post government disaster relief. This situation is suboptimal as households may not save sufficiently to cover the damage, and government compensation can be uncertain. Using a modeling approach we simulate unaffordability and uptake of various forms of flood insurance systems in EU countries. To do this, we build upon and advance the “Dynamic Integrated Flood Insurance” (DIFI) model, which integrates flood risk simulations, with an insurance sector and a consumer behavior model. We compute the results using various climatic- and socio-economic scenarios in order to assess the impact of climate- and socio-economic change for flood insurance in the EU. Furthermore, we assess the impact of remote natural disasters on flood insurance premiums in EU countries, which occurs through the global reinsurance market. More specifically, after large natural disasters or compound events occurring outside the EU, which are likely to occur more often due to climate change, reinsurance premiums can temporarily rise as a result of a global “hard” capital market for reinsurers. The higher cost of capital for reinsurers is then transferred to households in the EU through higher flood insurance premiums. We find that rising average, and higher variance, of flood risk towards the end of the century can increase flood insurance premiums, and cause higher premium volatility resulting from global reinsurance market conditions. The rise in premiums increases unaffordability of insurance coverage and results in declining demand for flood insurance. A proposed policy improvement is to introduce a public reinsurance system for flood risk, as governments can often provide cheaper reinsurance coverage and are less subject to volatility on capital markets. Besides this, we recommend a limited degree of premium cross-subsidization to limit the growth of premiums in high-risk areas, and insurance purchase requirements to increase the level of financial protection against flooding.  </p>

scholarly journals Characterising Local Knowledge across the Flood Risk Management Cycle: A Case Study of Southern Malawi

2019 ◽  
Vol 11 (6) ◽  
pp. 1681 ◽  
Author(s):  
Robert Šakić Trogrlić ◽  
Grant Wright ◽  
Melanie Duncan ◽  
Marc van den Homberg ◽  
Adebayo Adeloye ◽  
...  
Keyword(s):  
Risk Management ◽  
Local Knowledge ◽  
Flood Risk ◽  
Local Level ◽  
Flood Risk Management ◽  
Group Discussions ◽  
The Social ◽  
Underlying Causes ◽  
Complex Knowledge

People possess a creative set of strategies based on their local knowledge (LK) that allow them to stay in flood-prone areas. Stakeholders involved with local level flood risk management (FRM) often overlook and underutilise this LK. There is thus an increasing need for its identification, documentation and assessment. Based on qualitative research, this paper critically explores the notion of LK in Malawi. Data was collected through 15 focus group discussions, 36 interviews and field observation, and analysed using thematic analysis. Findings indicate that local communities have a complex knowledge system that cuts across different stages of the FRM cycle and forms a component of community resilience. LK is not homogenous within a community, and is highly dependent on the social and political contexts. Access to LK is not equally available to everyone, conditioned by the access to resources and underlying causes of vulnerability that are outside communities’ influence. There are also limits to LK; it is impacted by exogenous processes (e.g., environmental degradation, climate change) that are changing the nature of flooding at local levels, rendering LK, which is based on historical observations, less relevant. It is dynamic and informally triangulated with scientific knowledge brought about by development partners. This paper offers valuable insights for FRM stakeholders as to how to consider LK in their approaches.

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