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 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.

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 Assessment of Flood Risk Map under Climate Change RCP8.5 Scenarios in Taiwan

Water ◽  
2022 ◽  
Vol 14 (2) ◽  
pp. 207
Author(s):  
Yun-Ju Chen ◽  
Hsuan-Ju Lin ◽  
Jun-Jih Liou ◽  
Chao-Tzuen Cheng ◽  
Yung-Ming Chen
Keyword(s):  
Climate Change ◽  
High Risk ◽  
Flood Risk ◽  
Spatial Scales ◽  
Disaster Risk ◽  
Decision Makers ◽  
Risk Map ◽  
Climate Data ◽  
Risk Areas ◽  
Flood Risk Map

Climate change has exerted a significant global impact in recent years, and extreme weather-related hazards and incidents have become the new normal. For Taiwan in particular, the corresponding increase in disaster risk threatens not only the environment but also the lives, safety, and property of people. This highlights the need to develop a methodology for mapping disaster risk under climate change and delineating those regions that are potentially high-risk areas requiring adaptation to a changing climate in the future. This study provides a framework of flood risk map assessment under the RCP8.5 scenario by using different spatial scales to integrate the projection climate data of high resolution, inundation potential maps, and indicator-based approach at the end of the 21st century in Taiwan. The reference period was 1979–2003, and the future projection period was 2075–2099. High-resolution climate data developed by dynamic downscaling of the MRI-JMA-AGCM model was used to assess extreme rainfall events. The flood risk maps were constructed using two different spatial scales: the township level and the 5 km × 5 km grid. As to hazard-vulnerability(H-V) maps, users can overlay maps of their choice—such as those for land use distribution, district planning, agricultural crop distribution, or industrial distribution. Mapping flood risk under climate change can support better informed decision-making and policy-making processes in planning and preparing to intervene and control flood risks. The elderly population distribution is applied as an exposure indicator in order to guide advance preparation of evacuation plans for high-risk areas. This study found that higher risk areas are distributed mainly in northern and southern parts of Taiwan and the hazard indicators significantly increase in the northern, north-eastern, and southern regions under the RCP8.5 scenario. Moreover, the near-riparian and coastal townships of central and southern Taiwan have higher vulnerability levels. Approximately 14% of townships have a higher risk level of flooding disaster and another 3% of townships will become higher risk. For higher-risk townships, adaptation measures or strategies are suggested to prioritize improving flood preparation and protecting people and property. Such a flood risk map can be a communication tool to effectively inform decision- makers, citizens, and stakeholders about the variability of flood risk under climate change. Such maps enable decision-makers and national spatial planners to compare the relative flood risk of individual townships countrywide in order to determine and prioritize risk adaptation areas for planning spatial development policies.

scholarly journals Flood Risk Assessment in an Underground Railway System under the Impact of Climate Change—A Case Study of the Barcelona Metro

2020 ◽  
Vol 12 (13) ◽  
pp. 5291 ◽  
Author(s):  
Edwar Forero-Ortiz ◽  
Eduardo Martínez-Gomariz ◽  
Manuel Cañas Porcuna ◽  
Luca Locatelli ◽  
Beniamino Russo
Keyword(s):  
Climate Change ◽  
High Risk ◽  
Flood Risk ◽  
Urban Areas ◽  
Transport Systems ◽  
Maximum Rainfall ◽  
Increased Risk ◽  
Metro Systems ◽  
Flooding Events ◽  
The Impact

Flooding events can produce significant disturbances in underground transport systems within urban areas and lead to economic and technical consequences, which can be worsened by variations in the occurrence of climate extremes. Within the framework of the European project RESCCUE (RESilience to cope with Climate Change in Urban arEas—a multi-sectorial approach focusing on water), climate projections for the city of Barcelona manifest meaningful increases in maximum rainfall intensities for the 2100 horizon. A better comprehension of these impacts and their conditions is consequently needed. A hydrodynamic modelling process was carried out on Barcelona Metro Line 3, as it was identified as vulnerable to pluvial flooding events. The Metro line and all its components are simulated in the urban drainage models as a system of computational link and nodes reproducing the main physical characteristics like slopes and cross-sections when embedded in the current 1D/2D hydrodynamic model of Barcelona used in the project RESCCUE. This study presents a risk analysis focused on ensuring transport service continuity in flood events. The results reveal that two of the 26 stations on Metro Line 3 are exposed to a high risk of flooding in current rainfall conditions, and 11 of the 26 stations on Metro Line 3 are exposed to a high risk of flooding in future rainfall conditions for a 20-year return period event, which affects Metro service in terms of increased risk. This research gives insights for stakeholders and policymakers to enhance urban flood risk management, as a reasonable approach to tackle this issue for Metro systems worldwide. This study provides a baseline for assessing potential flood outcomes in Metro systems and can be used to evaluate adaptation measures’ effectiveness.

scholarly journals Understanding epistemic uncertainty in large-scale coastal flood risk assessment for present and future climates

2018 ◽  
Author(s):  
Michalis I. Vousdoukas ◽  
Dimitrios Bouziotas ◽  
Alessio Giardino ◽  
Laurens M. Bouwer ◽  
Evangelos Voukouvalas ◽  
...  
Keyword(s):  
Climate Change ◽  
Risk Assessment ◽  
Flood Risk ◽  
Large Scale ◽  
Epistemic Uncertainty ◽  
Coastal Protection ◽  
Flood Risk Assessment ◽  
Coastal Flood ◽  
Coastal Flood Risk ◽  
The Impact

Abstract. An upscaling of flood risk assessment frameworks beyond regional and national scales has taken place during recent years, with a number of large-scale models emerging as tools for hotspot identification, support for international policy-making and harmonization of climate change adaptation strategies. There is, however, limited insight on the scaling effects and structural limitations of flood risk models and, therefore, the underlying uncertainty. In light of this, we examine key sources of epistemic uncertainty in the Coastal Flood Risk (CFR) modelling chain: (i) the inclusion and interaction of different hydraulic components leading to extreme sea-level (ESL); (ii) inundation modelling; (iii) the underlying uncertainty in the Digital Elevation Model (DEM); (iv) flood defence information; (v) the assumptions behind the use of depth-damage functions that express vulnerability; and (vi) different climate change projections. The impact of these uncertainties to estimated Expected Annual Damage (EAD) for present and future climates is evaluated in a dual case study in Faro, Portugal and in the Iberian Peninsula. The ranking of the uncertainty factors varies among the different case studies, baseline CFR estimates, as well as their absolute/relative changes. We find that uncertainty from ESL contributions, and in particular the way waves are treated, can be higher than the uncertainty of the two greenhouse gas emission projections and six climate models that are used. Of comparable importance is the quality of information on coastal protection levels and DEM information. In the absence of large-extent datasets with sufficient resolution and accuracy the latter two factors are the main bottlenecks in terms of large-scale CFR assessment quality.

scholarly journals Pemetaan Area Berisiko Persampahan di Kota Cimahi Berdasarkan Pedoman Strategi Sanitasi Kabupaten/ Kota 2018

2019 ◽  
Vol 3 (2) ◽  
Author(s):  
Indah Fionita ◽  
Iwan Juwana
Keyword(s):  
High Risk ◽  
Solid Waste ◽  
Waste Disposal ◽  
Waste Reduction ◽  
Open Burning ◽  
Risk Areas ◽  
Strategic Policy ◽  
Waste Solid ◽  
The Impact ◽  
Very High

ABSTRAKKota Cimahi merupakan salah satu kota di Jawa Barat yang masih menghadapi permasalahan persampahan, seperti terbatasnya penerapan kegiatan pemilahan sampah, terbatasnya jumlah Tempat Penampungan Sementara (TPS), terjadi pembuangan sampah secara sembarangan ke sungai, terdapat penanganan sampah dengan cara dibakar dan ditimbun, dan lain-lain. Dalam menindaklanjuti berbagai permasalahan sampah tersebut serta mencapai target 30% pengurangan sampah yang ditentukan oleh Kebijakan Strategis Nasional (Jakstranas), maka diperlukan suatu instrumen yang mampu menganalisis area berisiko berdasarkan tingkat risiko persampahan per kelurahan di Kota Cimahi. Area berisiko tersebut digambarkan dalam bentuk peta dengan mengacu pada pedoman Strategi Sanitasi Kabupanen/Kota (SSK) 2018. Area berisiko dinilai melalui skor 1 s.d. 4 secara berturut-turut untuk risiko sangat rendah, rendah, tinggi, dan sangat tinggi. Skor tersebut diperoleh dengan mengalikan parameter Impact dan parameter Exposure. Hasil penelitian ini menunjukkan terdapat tiga kelurahan dengan risiko persampahan sangat tinggi, yaitu Kelurahan Cibeureum, Setiamanah, dan Padasuka serta satu kelurahan dengan risiko persampahan tinggi, yaitu Kelurahan Melong. Penambahan jumlah unit pengolahan direkomendasikan di beberapa kelurahan sehingga terjadi perubahan skor area berisiko.Kata Kunci: Kota Cimahi, Peta Area Berisiko, Persampahan ABSTRACTCimahi City is one of the cities in West Java that still faces solid waste problems, such as the limited implementation of waste sorting activities, the limited number of temporary shelter sites, the indiscriminate waste disposal on river, open burning of solid waste, etc. In following up on these various waste problems and achieving the target of 30% waste reduction determined by the National Strategic Policy, an instrument is needed to analyze risk areas based on the level of risk of solid waste per village in Cimahi City. These risk areas are depicted in the form of maps by referring to the 2018 District/City Sanitation Strategy Guidelines. Risk areas are assessed through a score of 1 s.d. 4 for very low, low, high and very high risks. The score is obtained by multiplying the Impact parameters and Exposure parameters. The results of this study indicate that there are three villages with very high risk of solid waste, namely Kelurahan Cibeureum, Setiamanah, and Padasuka and one village with high risk of solid waste, namely Kelurahan Melong. The addition of the number of processing units was recommended in several villages so that changes in the score of risk areas occurred. Keyword: Cimahi City, Map of Risk Areas, Waste Solid

scholarly journals Understanding the impact of climate change on inland flood risk in the UK

Weather ◽  
2021 ◽  
Vol 76 (10) ◽  
pp. 330-331
Author(s):  
Linda Speight ◽  
Karolina Krupska
Keyword(s):  
Climate Change ◽  
Flood Risk ◽  
Impact Of Climate Change ◽  
The Uk ◽  
The Impact

Estimates of future flood risk in Western Europe and its potential impact on insured losses.

2021 ◽  
Author(s):  
Remi Meynadier ◽  
Hugo Rakotoarimanga ◽  
Madeleine-Sophie Deroche ◽  
Sylvain Buisine
Keyword(s):  
Climate Change ◽  
Flood Risk ◽  
Large Scale ◽  
Western Europe ◽  
Complex Nature ◽  
Flood Risks ◽  
Hazard Exposure ◽  
Modelling Framework ◽  
Loss Modelling ◽  
The Impact

<p>The large-scale and complex nature of climate change makes it difficult to assess and quantify the impact on insurance activities. Climate change is likely affecting the probability of natural hazard occurrence in terms of severity and/or frequency.</p><p>Natural catastrophe risk is a function of hazard, exposure and vulnerability. As a (re)-insurer it is seen that changes in year-on-year losses are a function of all these components and not just the hazard.</p><p>The present study focuses, in a first step, on assessing impacts of climate change on fluvial flood risks in Europe solely due to changes in hazard itself. A stochastic catalogue of future flood risk events is derived from Pan-European data sets of river flood probability of occurrence produced within EU FP7 RAIN project. The loss modelling framework internally developed at AXA is then used to provide a geographical view of changes in future flood risks.</p><p> </p>

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