Making Communities More Flood Resilient: The Role of Cost Benefit Analysis and Other Decision-support Tools in Disaster Risk Reduction

Given the series of large-scale flood disasters that have occurred in recent years, there is a growing recognition among community leaders, businesses, insurers, governments and international donors of the need to invest in risk reduction measures before such events happen. Due to the costs of risk reduction measures, these actions need to be justified and as a result there is an increasing need to utilize decision-support tools, which can help to make the case for action to reduce disaster risks and build flood resilience when faced with limited resources. Across stakeholders, the specific objectives from the use of decision-support tools include (i) demonstrating the efficiency of the action ex-ante (before the flood); (ii) aiding in the selection of a particular intervention in enhancing community flood resilience from a suite of possible options; (iii) helping communities make the right choice when faced with limited investments; (iv) demonstrating the benefits of donor funding of community flood resilience projects; and (v) monitoring the successes and weaknesses of past interventions to generate lessons learned for future work. Typically, discussion on decision-support for disaster risk reduction (DRR) in floods (as well as for other hazards) has focused on cost-benefit analysis (CBA), however there are a number of other tools available to support decision-making. These include cost-effectiveness analysis (CEA), multi-criteria analysis (MCA) and robust-decision-making approaches (RDMA), which have been applied to similar problems, and can also be used to aid decision-making regarding flooding. This white paper provides an overview of the opportunities and challenges of applying these different tools, and guides the reader to select among them. Selection depends on the desired objective, circumstances, data available, timeframe to perform analyses, level of detail, and other considerations. We first focus on the CBA decision-tool, as this has been the mainstay of research and implementation. We then go beyond CBA to consider the other techniques for prioritising DRR investments. While our analysis is specific to flood DRR actions, the conclusion are also applicable to other hazards. The key findings arising from this white paper with relevance to research, policy and implementation of flood DRR decision-support tools, are: (1) Following a comprehensive review of the quantitative CBA flood DRR evidence, we find that flood DRR investments largely pay off, with an average of five dollars saved for every dollar spent through avoided and reduced losses; (2) Using CBA for flood risk reduction assessment should properly account for low-frequency, high-impact flood events, and also tackle key challenges such as intangible impacts; (3) Decision-making can be improved by using various decision support tools tailored to the desired outcomes and contexts. This white paper is the foundation upon which the Zurich flood resilience alliance work on integration of a decision toolbox will proceed "on the ground," with established community-based risk assessment tools, in particular Vulnerability Capacity Assessments (VCA) or Participatory Capacity and Vulnerability Assessments (PCVA). Based on these findings we propose a way forward over the next several years on informing risk-based decision making as part of the alliance program

Operationalizing Resilience Against Natural Disaster Risk: Opportunities, Barriers, and a Way Forward

The risks from floods have been rising globally due to increasing population, urbanization and economic development in hazard prone areas. The number of flood disasters throughout the world nearly doubled in the decade from 2000-2009 compared to the previous decade. There have been more flood disasters in the last four years (2010-2013) than in the whole decade of the 1980's. Evidence indicates that climate change-induced sea level rise, storm surge and more intense flooding will reinforce this trend unless risk management measures are undertaken immediately to well manage future losses and make communities more resilient to flooding. It is widely recognized that there is a mutually reinforcing relationship between disaster risk and development: disasters impact development and development impacts disasters. Evidence shows that repeated disasters undermine long-term socio-economic objectives. This is particularly evident in low income countries where disasters can impede the development process. The extensive time required to recover from damage, loss of capacity with which to rebuild and systemic risk negatively affect livelihoods in these countries, in the extreme case trapping people in poverty. In developed countries, recent floods triggered massive economic losses and undermined long-term competitiveness. The impact of disasters is felt most acutely by households and communities. In both developing and developed countries alike, local level studies strongly indicate that the poor suffer disproportionately due to the lack of financial and social safety nets, and institutional representation. Development can affect disaster risk via three main channels: by (1) increasing the physical assets and people exposed to the risk, (2) increasing the capacity to reduce the risk, respond to the risk and recover from the risk and (3) increasing or decreasing the vulnerability based on specific development strategies chosen. We identify this interaction as a key research gap; taking account of and balancing development opportunities with disaster risk will require a paradigm shift in the way we think about and do both development and disaster risk management

Climate change and increased risk for the insurance sector: A global perspective and an assessment for the Netherlands.

Climate change is projected to increase the frequency and severity of extreme weather events. As a consequence, economic losses caused by natural catastrophes could increase significantly. This will have considerable consequences for the insurance sector. On the one hand, increased risk from weather extremes requires assessing expected changes in damage and including adequate climate change projections in risk management. On the other hand, climate change can also bring new business opportunities for insurers. This paper gives an overview of the consequences of climate change for the insurance sector and discusses several strategies to cope with and adapt to increased risks. The particular focus is on the Dutch insurance sector, as the Netherlands is extremely vulnerable to climate change, especially with regard to extreme precipitation and flooding. Current risk sharing arrangements for weather risks are examined while potential new business opportunities, adaptation strategies, and public-private partnerships are identified. © The Author(s) 2009

Prospect theory, mitigation and adaptation to climate change

Climate change is one of the most pressing challenges in current environmental policy. Appropriate policies intended to stimulate efficient adaptation and mitigation should not exclusively rely on the assumption of the homo oeconomicus, but take advantage of well-researched alternative behavioural patterns. Prospect theory provides a number of climate-relevant insights, such as the notion that evaluations of outcomes are reference dependent, and the relevance of perceived certainty of outcomes. This paper systematically reviews what prospect theory can offer to analyse mitigation and adaptation. It is shown that accounting for reference dependence and certainty effects contributes to a better understanding of some well-known puzzles in the climate debate, including (but not limited to) the different uptake of mitigation and adaptation amongst individuals and nations, the role of technical vs. financial adaptation, and the apparent preference for hard protection measures in coastal adaptation. Finally, concrete possibilities for empirical research on these effects are proposed

General insurance marketing: a review and future research agenda

The financial services sector is a huge and diverse industry comprising many different forms of organisations and product offerings. Yet, a review of past papers in the Journal of Financial Services Marketing (JFSM) reveals a heavy bias towards articles on banking, to the neglect of other equally important financial services categories. The purpose of this paper is to address this imbalance and to call for more research to be conducted in a wider range of financial services categories. In particular, general insurance is singled out as a category worthy of further research. Looking to the past, this paper reviews research published to-date on general insurance in the JFSM to establish a benchmark and explore theoretical contributions. Attention is then turned to the future to identify a research agenda for the general insurance sector going forward. 5 important themes are identified: trust, transparency and simplification, technology, HNW and Takaful