IDEAS home Printed from https://ideas.repec.org/p/zbw/tubsem/200610.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/36445/1/51857959X.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    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. 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.
    5. 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.
    6. repec:bla:scandj:v:97:y:1995:i:4:p:495-526 is not listed on IDEAS
    7. repec:bpj:pewipo:v:2:y:2001:i:1:p:31-44:n:3 is not listed on IDEAS
    8. 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.
    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. 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.

    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. Andor, Mark A. & Osberghaus, Daniel & Simora, Michael, 2020. "Natural Disasters and Governmental Aid: Is there a Charity Hazard?," Ecological Economics, Elsevier, vol. 169(C).
    2. Paul Raschky & Reimund Schwarze & Manijeh Schwindt & Ferdinand Zahn, 2013. "Uncertainty of Governmental Relief and the Crowding out of Flood Insurance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 179-200, February.
    3. Schwarze, Reimund & Wagner, Gert G., 2005. "Versicherungspflicht gegen Elementarschäden: Ein Lehrstück für Probleme der volkswirtschaftlichen Politikberatung," Discussion Papers 2005/4, Technische Universität Berlin, School of Economics and Management.
    4. Franz Sinabell & Thomas Url, 2006. "Versicherungen als effizientes Mittel zur Risikotragung von Naturgefahren," WIFO Studies, WIFO, number 28181, August.
    5. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo.
    6. Howard Kunreuther & Erwann Michel-Kerjan, 2015. "Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 171-194, October.
    7. Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
    8. Torberg Falch & Justina AV Fischer, 2008. "Does a generous welfare state crowd out student achievement? Panel data evidence from international student tests," TWI Research Paper Series 31, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    9. Panu Poutvaara, 2006. "On the political economy of social security and public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 345-365, June.
    10. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 259-280, July.
    11. Krieger, Tim & Nientiedt, Daniel, 2022. "The renaissance of ordoliberalism in the 1970s and 1980s," Discussion Paper Series 2022-05, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    12. Arash Malekian & Ali Azarnivand, 2016. "Application of Integrated Shannon’s Entropy and VIKOR Techniques in Prioritization of Flood Risk in the Shemshak Watershed, Iran," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(1), pages 409-425, January.
    13. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    14. Paul Mosley & Robert Holzmann & Steen Jorgensen, 1999. "Social protection as social risk management: conceptual underpinnings for the social protection sector strategy paper," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(7), pages 1005-1027.
    15. Findeisen, Sebastian & Sachs, Dominik, 2015. "Designing efficient college and tax policies," Working Papers 15-09, University of Mannheim, Department of Economics.
    16. Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," Theory and Decision, Springer, vol. 64(2), pages 173-192, March.
    17. 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.
    18. 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.
    19. Audun Langørgen, 2000. "Revealed Standards for Distributing Public Home-Care on Clients," Discussion Papers 288, Statistics Norway, Research Department.
    20. Paul Raschky & Hannelore Weck-Hannemann, 2007. "Charity hazard - A real hazard to natural disaster insurance," Working Papers 2007-04, Faculty of Economics and Statistics, Universität Innsbruck.

    More about this item

    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:zbw:tubsem:200610. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwtubde.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.