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The political economy of natural disaster insurance: Lessons from the failure of a proposed compulsory insurance scheme in Germany

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  • Schwarze, Reimund
  • Wagner, Gert G.

Abstract

This paper studies the politico-economic reasons for the refusal of a proposed compulsory flood insurance scheme in Germany. It provides the rationale for such scheme and outlines the basic features of a market-orientated design. The main reasons for the political down-turn of this proposal were the (mis)perceived costs of a state guarantee, legal objections against a compulsory insurance, distributional conflicts between the federal government and the German states (Länder) on the implied administrative costs, and the well-known "charity hazard" of ad-hoc disaster relief. The focus on pure market solutions proved to be an ineffective strategy for policy advice in this field.

Suggested Citation

  • Schwarze, Reimund & Wagner, Gert G., 2006. "The political economy of natural disaster insurance: Lessons from the failure of a proposed compulsory insurance scheme in Germany," Discussion Papers 2006/10, Technische Universität Berlin, School of Economics and Management.
    • Handle: RePEc:zbw:tubsem:200610
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    References listed on IDEAS

    as
    1. Hans-Werner Sinn, 1994. "A Theory of the Welfare State," CESifo Working Paper Series 65, CESifo.
    2. Reimund Schwarze & Gert G. Wagner, 2002. "Hochwasserkatastrophe in Deutschland: über Soforthilfen hinausdenken," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 69(35), pages 596-600.
    3. Browne, Mark J & Hoyt, Robert E, 2000. "The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
    4. repec:bla:scandj:v:97:y:1995:i:4:p:495-526 is not listed on IDEAS
    5. repec:bpj:pewipo:v:2:y:2001:i:1:p:31-44:n:3 is not listed on IDEAS
    6. Reimund Schwarze & Gert G Wagner, 2004. "In the Aftermath of Dresden: New Directions in German Flood Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 29(2), pages 154-168, April.
    7. Thomas Von Ungern‐Sternberg, 2001. "Die Vorteile des Staatsmonopols in der Gebäudeversicherung: Erfahrungen aus Deutschland und der Schweiz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(1), pages 31-44, February.
    8. Reimund Schwarze & Gert G. Wagner, 2003. "Marktkonforme Versicherungspflicht für Naturkatastrophen: Bausteine einer Elementarschadenversicherung," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 70(12), pages 183-189.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Céline Grislain-Letrémy, 2018. "Natural Disasters: Exposure and Underinsurance," Annals of Economics and Statistics, GENES, issue 129, pages 53-83.
    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. Christian Kuhlicke & Anna Scolobig & Sue Tapsell & Annett Steinführer & Bruna Marchi, 2011. "Contextualizing social vulnerability: findings from case studies across Europe," 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. 58(2), pages 789-810, August.
    4. Karina Mužáková, 2014. "Optimal Model Financial Solutions Realization Of Natural Disasters In The Czech Republic," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 8(1), pages 911-935.
    5. Beck, Silke & Kuhlicke, Christian & Görg, Christoph, 2009. "Climate policy integration, coherence, and governance in Germany. PEER Climate Change Initiative - Project 2: "Climate policy integration, coherence, and governance"," UFZ Reports 01/2009, Helmholtz Centre for Environmental Research (UFZ).
    6. repec:dau:papers:123456789/13276 is not listed on IDEAS
    7. Kristian Krieger, 2013. "The limits and variety of risk‐based governance: The case of flood management in Germany and England," Regulation & Governance, John Wiley & Sons, vol. 7(2), pages 236-257, June.
    8. Surminski, Swenja, 2014. "The role of insurance in reducing direct risk: the case of flood insurance," LSE Research Online Documents on Economics 60764, London School of Economics and Political Science, LSE Library.
    9. Yildiz, Özgür, 2014. "Lehren aus der Verhaltensökonomik für die Gestaltung umweltpolitischer Maßnahmen [Lessons from behavioral economics for the design of environmental policy measures]," MPRA Paper 59360, University Library of Munich, Germany.
    10. 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.
    11. Donatella Porrini & Reimund Schwarze, 2014. "Insurance models and European climate change policies: an assessment," European Journal of Law and Economics, Springer, vol. 38(1), pages 7-28, August.
    12. Heidi Kreibich & Philip Bubeck & Michael Kunz & Holger Mahlke & Stefano Parolai & Bijan Khazai & James Daniell & Tobia Lakes & Kai Schröter, 2014. "A review of multiple natural hazards and risks in 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. 74(3), pages 2279-2304, December.
    13. E. Keskitalo & Gregor Vulturius & Peter Scholten, 2014. "Adaptation to climate change in the insurance sector: examples from the UK, Germany and the Netherlands," 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. 71(1), pages 315-334, March.
    14. Reimund Schwarze & Gert G. Wagner, 2009. "Natural Hazards Insurance in Europe - Tailored Responses to Climate Change Needed," Working Papers 2009-06, Faculty of Economics and Statistics, Universität Innsbruck.
    15. Dannenberg, Astrid & Mennel, Tim & Osberghaus, Daniel & Sturm, Bodo, 2009. "The economics of adaptation to climate change: the case of Germany," ZEW Discussion Papers 09-057, ZEW - Leibniz Centre for European Economic Research.

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