Flood Re: a missed opportunity for sustainable flood risk management?

The government and the insurance industry have recently launched Flood Re, a scheme that aims to make home insurance affordable to those living in a flood risk area. But that alone does not solve the problem, writes Swenja Surminski. These efforts should be accompanied by improvements to land-use planning, as well as by steps to build stronger flood defences, as these are some of the changes that will provide a more comprehensive management of flood risk

The role of insurance in reducing direct risk: the case of flood insurance

The provision of flood insurance is a patchwork, with countries showing varying degrees of penetration, coverage types, demand levels, and design structures. This article explores the current understanding of flood insurance with a specific focus on the ability of flood insurance to contribute to direct risk reduction. The starting point is a consideration of the existing provision of flood insurance, both in established insurance markets and in developing countries. A review of efforts to analyse and explain the use and design of flood insurance highlights how the understanding of supply and demand determinants is steadily growing, while clear gaps also emerge. Particularly the question of utilizing flood insurance in the context of climate change and as a lever for physical risk reduction would benefit from further empirical and theoretical analysis. The article concludes with a reflection on current efforts to reform and design flood insurance and offers some pointers for future research

How normative interpretations of climate risk assessment affect local decision making: an exploratory study at the city scale in Cork, Ireland

Urban areas already suffer substantial losses in both economic and human terms from climate related disasters. These losses are anticipated to grow substantially, in part as a result of the impacts of climate change. In this paper we investigate the process of translating climate risk data into action for the city level. We apply a commonly used decision-framework as our backdrop and explore where in this process climate risk assessment and normative political judgments intersect. We use the case of flood risk management in Cork city in Ireland to investigate what is needed for translating risk assessment into action at the local city level. Evidence presented is based on focus group discussions at two stakeholder workshops, and a series of individual meetings and phone-discussions with stakeholders involved in local decision making related to flood risk management and adaptation to climate change, in Ireland. Respondents were chosen on the basis of their expertise and/or involvement in the decision making processes locally and nationally. Representatives of groups affected by flood risk and flood risk management/adaptation efforts were also included. The Cork example highlights that, despite ever more accurate data and an increasing range of theoretical approaches available to local decision makers, it is the normative interpretation of this information that determines what action is taken. The use of risk assessments for decision making is a process that requires normative decisions, such as setting ‘acceptable risk levels’ and identifying ‘adequate’ protection levels, which will not succeed without broader buy-in and stakeholder participation. Identifying and embracing those up-front could strengthen the urban adaptation process - this may in fact turn out to be the biggest advantage of climate risk assessment: it offers an opportunity to create a shared understanding of the problem and enables an informed evaluation and discussion of remedial action

Flood insurance schemes and climate adaptation in developing countries

Risk transfer, including insurance, is widely recognized as a tool for increasing financial resilience to severe weather events such as floods. The application of this mechanism varies widely across countries, with a range of different types and schemes in operation. While most of the analytical focus has so far been on those markets that have a long tradition of insurance, there is still a clear gap in our understanding of how this mechanism works in a developing country context. This paper assesses 27 insurance schemes that transfer the risk of economic losses arising from floods in low—and middle income countries, focusing on the linkages between financial risk transfer and risk reduction. This aspect is important to avoid the effect of moral hazard and has gained particular relevance in the context of the climate change adaptation discourse, where some scholars and practitioners view insurance as a potential tool not just for current risks, but also to address projected future impacts of a changing climate by incentivizing risk reduction. We therefore look beyond the pure financial risk transfer nature of those 27 insurance schemes and investigate any prevention and risk reduction elements. Our analysis suggests that the potential for utilizing risk transfer for risk reduction is far from exhausted, with only very few schemes showing an operational link between risk transfer and risk reduction, while the effectiveness and implementation on the ground remains unclear. The dearth of linkages between risk reduction and insurance is a missed opportunity in the efforts to address rising risk levels, particularly in the context of climate change. Rising risk levels pose a threat to the insurability of floods, and insurance without risk reduction elements could lead to moral hazard. Therefore a closer linkage between risk transfer and risk reduction could make this a more sustainable and robust tool

When disaster strikes, who pays for the impacts of climate change?

Insurance is not always the most suitable solution, writes Swenja Surminsk

Submission to the inquiry on 'Future flood prevention' by the House of Commons Select Committee on Environment, Food and Rural Affairs

This is a submission by the ESRC Centre for Climate Change Economics and Policy and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science to the inquiry on ‘Future flood prevention’ by the House of Commons Select Committee on Environment, Food and Rural Affairs. The submission draws on our research, which provides strong evidence that the UK needs to develop a comprehensive strategy for flood risk management. The strategy needs to adopt a holistic approach, and include better land-use and planning policy, increased resilience for existing housing stock, improved flood defences and affordable insurance. The National Flood Resilience Review, launched by the Government in December 2015, could be an important step towards the creation of a comprehensive flood risk management strategy for the UK

Investigating private sector adaptation to climate change: the case of Tata Teleservices

There is a great deal of talk about engaging the private sector in climate change adaptation but little research into what companies are doing already. Jennifer Steeves and Swenja Surminski recently carried out a case study of Tata Teleservices to address this gap. In this article, they outline their key findings and suggest there is potential for private governance of adaptation for greater societal resilience if clearer incentives can be created

Surface water flood risk and management strategies for London: an agent-based model approach

Flooding is recognised as one of the most common and costliest natural disasters in England. Flooding in urban areas during heavy rainfall is known as ‘surface water flooding’, considered to be the most likely cause of flood events and one of the greatest short-term climate risks for London. In this paper we present results from a novel Agent-Based Model designed to assess the interplay between different adaptation options, different agents, and the role of flood insurance and the flood insurance pool, Flood Re, in the context of climate change. The model illustrates how investment in adaptation options could reduce London’s surface water flood risk, today and in the future. However, benefits can be outweighed by continued development in high risk areas and the effects of climate change. Flood Re is beneficial in its function to provide affordable insurance, even under climate change. However, it offers no additional benefits in terms of overall risk reduction, and will face increasing pressure due to rising surface water flood risk in the future. The modelling approach and findings are highly relevant for reviewing the proposed Flood Re scheme, as well as for wider discussions on the potential of insurance schemes, and broader multi-sectoral partnerships, to incentivise flood risk management in the UK and internationally