IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/87669.html
   My bibliography  Save this paper

Strengthening insurance partnerships in the face of climate change: insights from an agent-based model of flood insurance in the UK

Author

Listed:
  • Crick, Florence
  • Jenkins, Katie
  • Surminski, Swenja

Abstract

Multisectoral partnerships are increasingly cited as a mechanism to deliver and improve disaster risk management. Yet, partnerships are not a panacea and more research is required to understand the role that they can play in disaster risk management and particularly disaster risk reduction. This paper investigates how partnerships can incentivise flood risk reduction by focusing on the UK public-private partnership on flood insurance. Developing the right flood insurance arrangements to incentivise flood risk reduction and adaptation to climate change is a key challenge. In the face of rising flood risks due to climate change and socio-economic development insurance partnerships can no longer afford to focus only on the risk transfer function. However, while expectations of the insurance industry have traditionally been high when it comes to flood risk management, the insurance industry alone will not provide the solution to the challenge of rising risks. The case of flood insurance in the UK illustrates this: even national government and industry together cannot fully address these risks and other actors need to be involved to create strong incentives for risk reduction. Using an agent-based model focused on surface water flood risk in London we analyse how other partners could strengthen the insurance partnership by reducing flood risk and thus helping to maintain affordable insurance premiums. Our findings are relevant for wider discussions on the potential of insurance schemes to incentivise flood risk management and climate adaptation in the UK and also internationally.

Suggested Citation

  • Crick, Florence & Jenkins, Katie & Surminski, Swenja, 2018. "Strengthening insurance partnerships in the face of climate change: insights from an agent-based model of flood insurance in the UK," LSE Research Online Documents on Economics 87669, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:87669
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/87669/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Swenja Surminski & Laurens M. Bouwer & Joanne Linnerooth-Bayer, 2016. "How insurance can support climate resilience," Nature Climate Change, Nature, vol. 6(4), pages 333-334, April.
    2. Botzen, W.J.W. & Aerts, J.C.J.H. & van den Bergh, J.C.J.M., 2009. "Willingness of homeowners to mitigate climate risk through insurance," Ecological Economics, Elsevier, vol. 68(8-9), pages 2265-2277, June.
    3. Jonatan Pinkse & Ans Kolk, 2012. "Addressing the climate change sustainable development nexus: the role of multi-stakeholder partnerships," Post-Print hal-00707337, HAL.
    4. Swenja Surminski & Hayley Leck, 2016. "You never adapt alone – the role of MultiSectoral Partnerships in addressing urban climate risks," GRI Working Papers 232, Grantham Research Institute on Climate Change and the Environment.
    5. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    6. Bruce M. Taylor & Ben P. Harman, 2016. "Governing urban development for climate risk: What role for public–private partnerships?," Environment and Planning C, , vol. 34(5), pages 927-944, August.
    7. Haer, Toon & Botzen, W.J. Wouter & Aerts, Jeroen C.J.H., 2016. "The effectiveness of flood risk communication strategies and the influence of social networks—Insights from an agent-based model," Environmental Science & Policy, Elsevier, vol. 60(C), pages 44-52.
    8. Stefania Bandini & Sara Manzoni & Giuseppe Vizzari, 2009. "Agent Based Modeling and Simulation: An Informatics Perspective," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 12(4), pages 1-4.
    9. Surminski, Swenja, 2014. "The Role of Insurance in Reducing Direct Risk - The Case of Flood Insurance," International Review of Environmental and Resource Economics, now publishers, vol. 7(3-4), pages 241-278, December.
    10. Edmund C. Penning-Rowsell & Sally Priest & Clare Johnson, 2014. "The evolution of UK flood insurance: incremental change over six decades," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 30(4), pages 694-713, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heidi Tuhkanen & Michael Boyland & Guoyi Han & Anjalee Patel & Karlee Johnson & Arno Rosemarin & Ladylyn Lim Mangada, 2018. "A Typology Framework for Trade-Offs in Development and Disaster Risk Reduction: A Case Study of Typhoon Haiyan Recovery in Tacloban, Philippines," Sustainability, MDPI, vol. 10(6), pages 1-19, June.
    2. Xueling Bao & Fengwan Zhang & Xin Deng & Dingde Xu, 2021. "Can Trust Motivate Farmers to Purchase Natural Disaster Insurance? Evidence from Earthquake-Stricken Areas of Sichuan, China," Agriculture, MDPI, vol. 11(8), pages 1-15, August.
    3. Stephan Hügel & Anna R. Davies, 2020. "Public participation, engagement, and climate change adaptation: A review of the research literature," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 11(4), July.
    4. Roxane Marchal & Guillaume Piton & Elena Lopez-Gunn & Pedro Zorrilla-Miras & Peter van der Keur & Kieran W. J. Dartée & Polona Pengal & John H. Matthews & Jean-Marc Tacnet & Nina Graveline & Monica A., 2019. "The (Re)Insurance Industry’s Roles in the Integration of Nature-Based Solutions for Prevention in Disaster Risk Reduction—Insights from a European Survey," Sustainability, MDPI, vol. 11(22), pages 1-24, November.
    5. Si Ha & Hirokazu Tatano & Nobuhito Mori & Toshio Fujimi & Xinyu Jiang, 2021. "Cost–benefit analysis of adaptation to storm surge due to climate change in Osaka Bay, Japan," Climatic Change, Springer, vol. 169(3), pages 1-20, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Florence Crick & Katie Jenkins & Swenja Surminski, 2016. "Strengthening insurance partnerships in the face of climate change – insights from an agent-based model of flood insurance in the UK," GRI Working Papers 241, Grantham Research Institute on Climate Change and the Environment.
    2. Swenja Surminski & Paul Hudson & Jeroen Aerts & Wouter Botzen & M.Conceição Colaço & Florence Crick & Jill Eldridge & Anna Lorant & António Macedo & Reinhard Mechler & Carlos Neto & Robin Nicolai & Di, 2015. "Novel and improved insurance instruments for risk reduction," GRI Working Papers 188, Grantham Research Institute on Climate Change and the Environment.
    3. Morshedi, Mohamad Ali & Kashani, Hamed, 2022. "Assessment of vulnerability reduction policies: Integration of economic and cognitive models of decision-making," Reliability Engineering and System Safety, Elsevier, vol. 217(C).
    4. 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.
    5. Toon Haer & W. J. Wouter Botzen & Hans de Moel & Jeroen C. J. H. Aerts, 2017. "Integrating Household Risk Mitigation Behavior in Flood Risk Analysis: An Agent‐Based Model Approach," Risk Analysis, John Wiley & Sons, vol. 37(10), pages 1977-1992, October.
    6. 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.
    7. Surminski, Swenja & Eldridge, Jillian, 2015. "Flood insurance in England: an assessment of the current and newly proposed insurance scheme in the context of rising flood risk," LSE Research Online Documents on Economics 66256, London School of Economics and Political Science, LSE Library.
    8. 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).
    9. Andor, Mark A. & Osberghaus, Daniel & Simora, Michael, 2020. "Natural Disasters and Governmental Aid: Is there a Charity Hazard?," Ecological Economics, Elsevier, vol. 169(C).
    10. 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.
    11. W. J. Wouter Botzen & Howard Kunreuther & Jeffrey Czajkowski & Hans de Moel, 2019. "Adoption of Individual Flood Damage Mitigation Measures in New York City: An Extension of Protection Motivation Theory," Risk Analysis, John Wiley & Sons, vol. 39(10), pages 2143-2159, October.
    12. Daniel R. Petrolia & Craig E. Landry & Keith H. Coble, 2013. "Risk Preferences, Risk Perceptions, and Flood Insurance," Land Economics, University of Wisconsin Press, vol. 89(2), pages 227-245.
    13. Max Tesselaar & W. J. Wouter Botzen & Timothy Tiggeloven & Jeroen C. J. H. Aerts, 2023. "Flood insurance is a driver of population growth in European floodplains," Nature Communications, Nature, vol. 14(1), pages 1-14, December.
    14. P. Bubeck & W. J. W. Botzen & J. C. J. H. Aerts, 2012. "A Review of Risk Perceptions and Other Factors that Influence Flood Mitigation Behavior," Risk Analysis, John Wiley & Sons, vol. 32(9), pages 1481-1495, September.
    15. Porntida Poontirakul & Charlotte Brown & Erica Seville & John Vargo & Ilan Noy, 2017. "Insurance as a Double-Edged Sword: Quantitative Evidence from the 2011 Christchurch Earthquake," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 609-632, October.
    16. Asadul Islam & C. Matthew Leister & Minhaj Mahmud & Paul A. Raschky, 2020. "Natural disaster and risk-sharing behavior: Evidence from rural Bangladesh," Journal of Risk and Uncertainty, Springer, vol. 61(1), pages 67-99, August.
    17. Nicolò Barbieri & Massimiliano Mazzanti & Anna Montini & Andrea Rampa, 2022. "Risk Attitudes to Catastrophic Events: VSL and WTP for Insurance Against Earthquakes," Economics of Disasters and Climate Change, Springer, vol. 6(2), pages 317-337, July.
    18. 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.
    19. 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.
    20. Swenja Surminski & Paul Hudson, 2017. "Investigating the Risk Reduction Potential of Disaster Insurance Across Europe," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 247-274, April.

    More about this item

    Keywords

    partnerships; insurance; climate change; surface water flood risk;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:87669. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.