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

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  • 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
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    File URL: http://eprints.lse.ac.uk/87669/
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    References listed on IDEAS

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    Cited by:

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    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.

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    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

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