Transcript Can Coastal Europe Insure Against Climate Change: A Review of

Can Coastal Europe Insure Against
Climate Change: A Review of
Experiences on Floods and Soil Erosion
Phoebe Koundouri, Bénédicte
Rulleau, and Mavra Stithou
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Characteristics of Natural Disaster
Risks
• Climate change is expected to increase the frequency and severity of
flooding in certain regions (IPCC, 2007). The damage from natural disasters
in Europe has rapidly increased over the past decades, mainly because of
the growth of capital accumulated in flood-prone areas
Socio-economic change and climate change
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•
•
•
“Risk”
Low probability
Not completely unpredictable
Highly publicized, impact on individuals, firms and governments
Involve unpredictable risk components but also individual control
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Severity of Consequences and
Economy
Disaster
loss
Complexity of socioeconomic structure and
interdependency within
and across countries
increases
Financial &/or
technological
countermeasures
Simple economic
structures
Middle income level economies
Development
level
Source: Benson and Clay 1998; Lester, 2008; Kellenberg and Mobarak, 2008
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Hazard Risk Management
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Determinants of Perception
•
•
•
•
How well people understand the •
process , the degree of catastrophe
How equitably the danger is distributed
over time and space
How well individuals can control their
exposure
•
Whether exposure is familiar
“The feelings, emotions and values that
people gain through experience through •
living in their social networks, have a major
effect on their reactions towards risk ”
(Morrow 2009)
•
•
Another determinant of risk attitude is the
general disposition towards risk
Subjective risk perceptions very much depend
on how the risky situation is framed or
presented to an individual decision-maker
(Kahneman and Tversky, 1979)
Individual underestimate the probability of a
future disaster if they have not personally
experienced the event
Difficulties
probability
interpreting
correctly
low
Even if there is knowledge about the
probability of disaster that does not imply
awareness about consequences or action
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The Risk & Perceived Risk - Triangle
(Crichton and Mounsey, 1997;Priest, 2003)
Flood frequency and
magnitude
Extent of flood
impact
Cost of damage
or loss
It is the varying perceptions of risk rather than reality of risk that must be
managed. For these perceptions to be managed, local knowledge must be
acknowledged
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Response of Individuals
• Move out from areas that are at high risk and reallocate in a safer area
• Self – protect by building structures less vulnerable to damage
• Insure by paying a premium in an insurance company
• Institutions can influence the decision to undertake mitigation (Botzen et
al. 2009):
Existing arrangements for compensating flood damage (the role of
government), risk awareness and perceptions, and geographical
characteristics were more important determinants than the
socioeconomic characteristics. The main incentive for homeowners to
choose for investing in water barriers was likely to be the premium
discount on the flood insurance policy provided to them
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Response of Government
• Ex ante public program e.g well-enforced regulations, mandatory private
disaster insurance, building codes in disaster prone areas, incentives
through grants, loans and taxes
• Ex post public program eg. rehabilitation and recovery, reconstruction
• Reinsurance, public-private
catastrophe bonds
or
national-international
partnerships,
• When it is not possible to find international reinsurance, governments
tend to self-insure through budgetary allocation
• An interrelationship exists between individual behaviour and structure of
government policies
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Response of Insurance Schemes
• Increasing premiums or pulling out of risky markets common strategy
• Link premium to mitigation measures
• Public-private partnerships
• Reinsurance markets
• Alternative Risk Transfers (ARTs) in global markets, for example
catastrophe bonds
• Invest in Research and Development to explore significant changes of
known risks in their structure or occurrence probability and to identify
new risks at an early stage
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Flood Risk Management Measures
(Adapted from Parker 2007)
Probability
of flooding
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Types of Flood Insurance
Netherlands?
Different countries have
different home insurance
markets where insurance
can come bundled with all
cover (including flooding),
or unbundled (where each
component
is
sold
separately) whilst the
market may be entirely
private,
or
a
state
monopoly (Dawson et al.
2011).
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The Role of Insurance
• Although insurance schemes
cannot impact on hazard
(frequency and magnitude of
flood),
they
impact
on
vulnerability (extent of impact on
property) and exposure (cost of
damage).
• Vulnerability: By using pricing or
restrictions on available cover
(i.e. keeping valuable items
above flood level, don't enter an
area)
• Exposure:
modifying
the
insurance excesses/deductable
and create incentives to relocate
away from flood hazard zones
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Conclusions
• A catastrophe recovery, cost limitation and management tool (Clark 1998)
by risk sharing, influencing decisions to locate in the floodplain and by
encouraging the use of measures to minimise damage (Doornkamp, 1995;
Arnell, 2000).
• A wider portfolio of measures to adapt to climate change is needed
• A combination of measures that both limit damage (economic use of a
flood zone by creating incentives) and reduce the probability of flooding
(engineered coastal defense measures) is likely to be the most effective
way of preventing the occurrence of extremely large flood damages (Aerts
et al. 2008)
• Increase individual coastal flood risk awareness by risk communication,
financial mechanisms and technical engineering solutions (Filatova et al.
2011)
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THESEUS: “Innovative Technologies for Safer
European Coasts in a Changing Climate”
• Qualitative questionnaire survey: explore initial
behavioural patterns and investigate the degree of
awareness and knowledge on strategies of hedging
natural hazards
• Respondents:
residents,
business
owners,
environmental NGOs, insurance companies and local
authorities
• Case studies: Spain, UK, Italy, France, Poland and
Bulgaria
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THESEUS: “Innovative Technologies for Safer
European Coasts in a Changing Climate”
• Santander Choice Experiment (WTP survey)
• Elicit public preferences
mitigation measures
for
climate
change
 Reduction of beach size/erosion
 Biodiversity
 Health risk
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Thank you...
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