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Insurance Against Climate Change and Flooding in the Netherlands: Present, Future, and Comparison with Other Countries

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  • W. J. W. Botzen
  • J. C. J. M. Van Den Bergh

Abstract

Climate change is projected to cause severe economic losses, which has the potential to affect the insurance sector and public compensation schemes considerably. This article discusses the role insurance can play in adapting to climate change impacts. The particular focus is on the Dutch insurance sector, in view of the Netherlands being extremely vulnerable to climate change impacts. The usefulness of private insurance as an adaptation instrument to increased flood risks is examined, which is currently unavailable in the Netherlands. It is questioned whether the currently dominant role of the Dutch government in providing damage relief is justified from an economic efficiency perspective. Characteristics of flood insurance arrangements in the Netherlands, the United Kingdom, Germany, and France are compared in order to identify possible future directions for arrangements in the Netherlands. It is argued that social welfare improves when insurance companies take responsibility for part of the risks associated with climate change.

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  • W. J. W. Botzen & J. C. J. M. Van Den Bergh, 2008. "Insurance Against Climate Change and Flooding in the Netherlands: Present, Future, and Comparison with Other Countries," Risk Analysis, John Wiley & Sons, vol. 28(2), pages 413-426, April.
    • Handle: RePEc:wly:riskan:v:28:y:2008:i:2:p:413-426
    DOI: 10.1111/j.1539-6924.2008.01035.x
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    1. Haddad, Eduardo & Teixeira, Eliane, 2013. "Economic Impacts of Natural Disasters in Megacities: The Case of Floods in São Paulo, Brazil," TD NEREUS 4-2013, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    2. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.
    3. Bjoern Hagendorff & Jens Hagendorff & Kevin Keasey, 2015. "The Impact of Mega‐Catastrophes on Insurers: An Exposure‐Based Analysis of the U.S. Homeowners’ Insurance Market," Risk Analysis, John Wiley & Sons, vol. 35(1), pages 157-173, January.
    4. Susanne Hanger & Joanne Linnerooth‐Bayer & Swenja Surminski & Cristina Nenciu‐Posner & Anna Lorant & Radu Ionescu & Anthony Patt, 2018. "Insurance, Public Assistance, and Household Flood Risk Reduction: A Comparative Study of Austria, England, and Romania," Risk Analysis, John Wiley & Sons, vol. 38(4), pages 680-693, April.
    5. Max Tesselaar & W. J. Wouter Botzen & Toon Haer & Paul Hudson & Timothy Tiggeloven & Jeroen C. J. H. Aerts, 2020. "Regional Inequalities in Flood Insurance Affordability and Uptake under Climate Change," Sustainability, MDPI, vol. 12(20), pages 1-30, October.
    6. Francesco Serinaldi & Chris G. Kilsby, 2017. "A Blueprint for Full Collective Flood Risk Estimation: Demonstration for European River Flooding," Risk Analysis, John Wiley & Sons, vol. 37(10), pages 1958-1976, October.
    7. Paul Hudson, 2020. "The Affordability of Flood Risk Property‐Level Adaptation Measures," Risk Analysis, John Wiley & Sons, vol. 40(6), pages 1151-1167, June.
    8. Unterberger, Christian & Hudson, Paul & Botzen, W.J. Wouter & Schroeer, Katharina & Steininger, Karl W., 2019. "Future Public Sector Flood Risk and Risk Sharing Arrangements: An Assessment for Austria," Ecological Economics, Elsevier, vol. 156(C), pages 153-163.
    9. Paul Hudson, 2018. "A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(7), pages 1019-1038, October.
    10. Poontirakul, Porntida & Brown, Charlotte & Noy, Ilan & Seville, Erica & Vargo, John, 2016. "The role of commercial insurance in post-disaster recovery: Quantitative evidence from the 2011 Christchurch earthquake," Working Paper Series 19396, Victoria University of Wellington, School of Economics and Finance.
    11. Sitong Yang & Shouwei Li & Xue Rui & Tianxiang Zhao, 2024. "The impact of climate risk on the asset side and liability side of the insurance industry: evidence from China," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-51, June.
    12. Kanitsorn Terdpaopong & Robert C. Rickards, 2021. "Thai Non-Life Insurance Companies’ Resilience and the Historic 2011 Floods: Some Recommendations for Greater Sustainability," Sustainability, MDPI, vol. 13(16), pages 1-19, August.
    13. Jason Thistlethwaite, 2017. "The Emergence of Flood Insurance in Canada: Navigating Institutional Uncertainty," Risk Analysis, John Wiley & Sons, vol. 37(4), pages 744-755, April.
    14. Paul O'Hare & Iain White & Angela Connelly, 2016. "Insurance as maladaptation: Resilience and the ‘business as usual’ paradox," Environment and Planning C, , vol. 34(6), pages 1175-1193, September.
    15. Erich Seamon & Paul E. Gessler & John T. Abatzoglou & Philip W. Mote & Stephen S. Lee, 2023. "Climatic Damage Cause Variations of Agricultural Insurance Loss for the Pacific Northwest Region of the United States," Agriculture, MDPI, vol. 13(12), pages 1-13, November.
    16. Francesco Serinaldi & Florian Loecker & Chris G. Kilsby & Hubert Bast, 2018. "Flood propagation and duration in large river basins: a data-driven analysis for reinsurance purposes," 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. 94(1), pages 71-92, October.
    17. Janto S. Hess & Ilan Kelman & Rachel Dodds, 2023. "The environment and climate change as a primary stakeholder for accommodation suppliers: Stakeholder engagement for Koh Tao and Koh Phi Phi, Thailand," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4683-4692, November.
    18. Tesselaar, Max & Botzen, W.J. Wouter & Robinson, Peter J. & Aerts, Jeroen C.J.H. & Zhou, Fujin, 2022. "Charity hazard and the flood insurance protection gap: An EU scale assessment under climate change," Ecological Economics, Elsevier, vol. 193(C).
    19. Tiberio Daddi & Niccolò Maria Todaro & Maria Rosa De Giacomo & Marco Frey, 2018. "A Systematic Review of the Use of Organization and Management Theories in Climate Change Studies," Business Strategy and the Environment, Wiley Blackwell, vol. 27(4), pages 456-474, May.
    20. Astrid Molenveld & Arwin Buuren & Gerald-Jan Ellen, 2020. "Governance of climate adaptation, which mode? An exploration of stakeholder viewpoints on how to organize adaptation," Climatic Change, Springer, vol. 162(2), pages 233-254, September.
    21. Mol, Jantsje M. & Botzen, W.J. Wouter & Blasch, Julia E., 2020. "Behavioral motivations for self-insurance under different disaster risk insurance schemes," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 967-991.
    22. W. J. Wouter Botzen & Jeroen C. J. M. Van Den Bergh, 2012. "Monetary Valuation Of Insurance Against Flood Risk Under Climate Change," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 1005-1026, August.
    23. Peter John Robinson & W. J. Wouter Botzen, 2019. "Determinants of Probability Neglect and Risk Attitudes for Disaster Risk: An Online Experimental Study of Flood Insurance Demand among Homeowners," Risk Analysis, John Wiley & Sons, vol. 39(11), pages 2514-2527, November.

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