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Economic Assessment of Mitigating Damage of Flood Events: Cost–Benefit Analysis of Flood-Proofing Commercial Buildings in Umbria, Italy

Author

Listed:
  • W. J. Wouter Botzen

    (Vrije Universiteit Amsterdam
    Utrecht University)

  • Érika Monteiro

    (Vrije Universiteit Amsterdam)

  • Francisco Estrada

    (Vrije Universiteit Amsterdam
    Universidad Nacional Autónoma de México)

  • Giulia Pesaro

    (Politecnico di Milano)

  • Scira Menoni

    (Politecnico di Milano)

Abstract

Floods are among the costliest natural disasters worldwide. Integrated flood risk management approaches involving both public and private measures have been proposed to cope with trends in flood risk. These approaches are hampered by a lack of information about the cost-effectiveness of private flood damage mitigation measures. This study examines the economic desirability of flood-proofing different types of commercial buildings in Umbria, which is a flood-prone region in Europe. A cost–benefit analysis (CBA) is applied, which uses empirical information on flood damages to a variety of commercial activities. The CBA accounts for a diversity of uncertainties, including those of flood damage statistics and related flood-proofing benefits derived from bootstrap methods. Results show that, on average, dry flood-proofing is economically attractive for certain categories of commercial buildings. The flood probability and uncertainty of damage are key factors driving CBA results. Implications of our findings for policymakers and insurers are discussed.

Suggested Citation

  • W. J. Wouter Botzen & Érika Monteiro & Francisco Estrada & Giulia Pesaro & Scira Menoni, 2017. "Economic Assessment of Mitigating Damage of Flood Events: Cost–Benefit Analysis of Flood-Proofing Commercial Buildings in Umbria, Italy," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 585-608, October.
    • Handle: RePEc:pal:gpprii:v:42:y:2017:i:4:d:10.1057_s41288-017-0065-0
    DOI: 10.1057/s41288-017-0065-0
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    References listed on IDEAS

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    1. Hudson, Paul & Botzen, W.J. Wouter & Feyen, Luc & Aerts, Jeroen C.J.H., 2016. "Incentivising flood risk adaptation through risk based insurance premiums: Trade-offs between affordability and risk reduction," Ecological Economics, Elsevier, vol. 125(C), pages 1-13.
    2. S. Surminski & J. Aerts & W. Botzen & P. Hudson & J. Mysiak & C. Pérez-Blanco, 2015. "Reflections on the current debate on how to link flood insurance and disaster risk reduction in the European Union," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(3), pages 1451-1479, December.
    3. Howard Kunreuther, 2015. "The Role of Insurance in Reducing Losses from Extreme Events: The Need for Public–Private Partnerships†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(4), pages 741-762, October.
    4. Heidi Kreibich & Annegret Thieken, 2009. "Coping with floods in the city of Dresden, Germany," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 51(3), pages 423-436, December.
    5. Hartmann, Thomas & Spit, Tejo, 2016. "Legitimizing differentiated flood protection levels – Consequences of the European flood risk management plan," Environmental Science & Policy, Elsevier, vol. 55(P2), pages 361-367.
    6. R. Mechler, 2016. "Reviewing estimates of the economic efficiency of disaster risk management: opportunities and limitations of using risk-based cost–benefit analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 81(3), pages 2121-2147, April.
    7. Heidi Kreibich & Philip Bubeck & Mathijs Vliet & Hans Moel, 2015. "A review of damage-reducing measures to manage fluvial flood risks in a changing climate," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 20(6), pages 967-989, August.
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