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.

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.

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 Influence of flood risk characteristics on flood insurance demand: a comparison between Germany and the Netherlands

2013 ◽  
Vol 13 (7) ◽  
pp. 1691-1705 ◽  
Author(s):  
I. Seifert ◽  
W. J. W. Botzen ◽  
H. Kreibich ◽  
J. C. J. H. Aerts
Keyword(s):  
The Netherlands ◽  
Flood Risk ◽  
Risk Perceptions ◽  
Private Insurance ◽  
Insurance Coverage ◽  
Individual Risk ◽  
Flood Insurance ◽  
Insurance Demand ◽  
Information Campaigns ◽  
Demand For Insurance

Abstract. The existence of sufficient demand for insurance coverage against infrequent losses is important for the adequate function of insurance markets for natural disaster risks. This study investigates how characteristics of flood risk influence household flood insurance demand based on household surveys undertaken in Germany and the Netherlands. Our analyses confirm the hypothesis that willingness to pay (WTP) for insurance against medium-probability medium-impact flood risk in Germany is higher than WTP for insurance against low-probability high-impact flood risk in the Netherlands. These differences in WTP can be related to differences in flood experience, individual risk perceptions, and the charity hazard. In both countries there is a need to stimulate flood insurance demand if a relevant role of private insurance in flood loss compensation is regarded as desirable, for example, by making flood insurance compulsory or by designing information campaigns.

scholarly journals Zika virus syndrome, lack of environmental policies and risks of worsening by cyanobacteria proliferation in a climate change scenario

2020 ◽  
Vol 54 ◽  
pp. 83
Author(s):  
Sofia Lizarralde Oliver ◽  
Helena Ribeiro
Keyword(s):  
Climate Change ◽  
Low Income ◽  
Zika Virus ◽  
Low Income Countries ◽  
Change Scenario ◽  
New Findings ◽  
Pregnant Mice ◽  
Chronic Ingestion ◽  
Low Levels ◽  
Hot Weather

Almost half of the Brazilian population has no access to sewage collection and treatment. Untreated effluents discharged in waters of reservoirs for human supply favor the flowering of cyanobacteria – and these microorganisms produce toxins, such as saxitoxin, which is a very potent neurotoxin present in reservoirs in the Northeast region. A recent study confirmed that chronic ingestion of neurotoxin-infected water associated with Zika virus infection could lead to a microcephaly-like outcome in pregnant mice. Cyanobacteria benefit from hot weather and organic matter in water, a condition that has been intensified by climate change, according to our previous studies. Considering the new findings, we emphasize that zika arbovirus is widespread and worsened when associated with climate change, especially in middle- or low-income countries with low levels of sanitation coverage.

Water scarcity and sustainability in the arid area of North America: Insights gained from a cross border perspective

2017 ◽  
Vol 7 (1) ◽  
pp. 6-18 ◽  
Author(s):  
Alejandro Yáñez-Arancibia ◽  
John W. Day
Keyword(s):  
Climate Change ◽  
North America ◽  
Water Scarcity ◽  
Economic Change ◽  
American Southwest ◽  
Arid Area ◽  
Border Region ◽  
Cross Border ◽  
Sharp Focus ◽  
The Face

The arid border region that encompasses the American Southwest and the Mexican northwest is an area where the nexus of water scarcity and climate change in the face of growing human demands for water, emerging energy scarcity, and economic change comes into sharp focus.

scholarly journals Early mortality and freshwater forage fish recruitment: nonnative alewife and native rainbow smelt interactions in Lake Champlain

2019 ◽  
Vol 76 (5) ◽  
pp. 806-814
Author(s):  
Paul W. Simonin ◽  
Lars G. Rudstam ◽  
Patrick J. Sullivan ◽  
Donna L. Parrish ◽  
Bernard Pientka
Keyword(s):  
Climate Change ◽  
Distribution Patterns ◽  
Mortality Rates ◽  
Early Mortality ◽  
Fish Distribution ◽  
Change Scenario ◽  
Lake Champlain ◽  
Species Introduction ◽  
Rainbow Smelt ◽  
Fish Recruitment

We studied the consequences of a nonnative species introduction and changes in temperature on early mortality and recruitment of native rainbow smelt (Osmerus mordax) and nonnative alewife (Alosa pseudoharengus) in Lake Champlain using a simulation model. Distribution patterns of adults and young-of-the-year (YOY) fish were predicted using a model based on observed distribution of different age groups as a function of temperature and light profiles simulated on a daily basis. Mortality rates averaged over the growing season were calculated as a function of fish densities and overlap between adults and YOY. Survival of YOY rainbow smelt and alewife depended on which predator was most abundant. Rainbow smelt YOY mortality rates are highest when rainbow smelt adults are abundant, and alewife YOY mortality rates are highest when alewife adults are abundant, potentially allowing coexistence. August and September mortality rates were higher in the climate change scenario because of increased overlap of adults and YOY of both species. These results indicate that accounting for spatiotemporal fish distribution patterns can be important when forecasting the interacting effects of climate change and aquatic invasive species on fish recruitment.

scholarly journals Simulating Agroforestry Adoption in Rural Indonesia: The Potential of Trees on Farms for Livelihoods and Environment

Land ◽  
2021 ◽  
Vol 10 (4) ◽  
pp. 385
Author(s):  
Beatrice Nöldeke ◽  
Etti Winter ◽  
Yves Laumonier ◽  
Trifosa Simamora
Keyword(s):  
Climate Change ◽  
Climate Change Scenario ◽  
Agroforestry System ◽  
Environmental Benefits ◽  
Small Scale ◽  
Change Scenario ◽  
Trees On Farms ◽  
Agroforestry Adoption ◽  
Mitigate Climate Change ◽  
Small Scale Farmers

In recent years, agroforestry has gained increasing attention as an option to simultaneously alleviate poverty, provide ecological benefits, and mitigate climate change. The present study simulates small-scale farmers’ agroforestry adoption decisions to investigate the consequences for livelihoods and the environment over time. To explore the interdependencies between agroforestry adoption, livelihoods, and the environment, an agent-based model adjusted to a case study area in rural Indonesia was implemented. Thereby, the model compares different scenarios, including a climate change scenario. The agroforestry system under investigation consists of an illipe (Shorea stenoptera) rubber (Hevea brasiliensis) mix, which are both locally valued tree species. The simulations reveal that farmers who adopt agroforestry diversify their livelihood portfolio while increasing income. Additionally, the model predicts environmental benefits: enhanced biodiversity and higher carbon sequestration in the landscape. The benefits of agroforestry for livelihoods and nature gain particular importance in the climate change scenario. The results therefore provide policy-makers and practitioners with insights into the dynamic economic and environmental advantages of promoting agroforestry.

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