Transcript Can Coastal Europe Insure Against Climate Change: A

CAN COASTAL EUROPE INSURE AGAINST
CLIMATE CHANGE:
A REVIEW OF EXPERIENCES ON FLOODS AND
SHORELINE EROSION
Phoebe Koundouri, Bénédicte Rulleau and Mavra Stithou
Biarritz symposium – 18-21 October 2011
Characteristics of Natural Disaster Risks
CC expected to increase the frequency and severity of flooding
in certain regions (IPCC, 2007)
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Damages from natural disasters in Europe rapidly increased over the
past decades, mainly because of the growth of capital accumulated in
flood-prone areas
Socio-economic change and climate change  “Risk” 
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Biarritz symposium – 18-21 October 2011
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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Biarritz symposium – 18-21 October 2011
The Risk & Perceived Risk-Triangles (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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Biarritz symposium – 18-21 October 2011
Response of Individuals to Natural Disasters
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
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Factors for under-insurance:
 “this will not happen to me” belief
 May ignore, knowingly or not, low probability but high consequences
events
 May be priced out of the insurance market
Highly linked with a recent flood experience
Biarritz symposium – 18-21 October 2011
Response of Firms to Natural Disasters
Same here but impacts also relate to human resources,
physical resources, business continuity and disaster recovery
plan
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Vulnerability of small firms
Biarritz symposium – 18-21 October 2011
Response of Governments to Natural Disasters
Ex ante public program e.g. well-enforced regulations,
mandatory private disaster insurance, building codes in
disaster prone areas, incentives through grants and taxes…
Ex post public program e.g. rehabilitation and recovery,
reconstruction
Reinsurance, public-private or national-international
partnerships, catastrophe bonds
When not possible to find international reinsurance, selfinsurance through budgetary allocation
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Interrelationship between individual behaviour and structure
of government policies
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Biarritz symposium – 18-21 October 2011
Roles of Insurance
Assist recovery by
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Minimizing death, loss and damage
Focusing attention on risk
Placing the burden of that risk on the hazard zone dwellers
 Reduce vulnerability and sensibility by affecting “perceived
risk”
 Promote resilience
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Biarritz symposium – 18-21 October 2011
Roles of Insurance
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But can also help customers affected by weather events such
as floods by:
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Managing repair process
Bringing in supplies and quality assured repairers
Providing for temporary accommodation while repairs are undertaken
If part of the cover, providing alternative premises for small business to
run out of while repairs are i,n progress
Biarritz symposium – 18-21 October 2011
Roles of Insurance
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And can help the society to adapt and become more resilient
(Crichton, 2008):
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Assistance with identifying areas at risk
Catastrophe modelling
Economic incentives to discourage construction in flood plain
Collection of data on the costs of flood damage to feed into benefit cost
appraisals for flood management schemes
Promotion of resilient reinstatement techniques
Promotion of temporary defence solutions
Biarritz symposium – 18-21 October 2011
Types of Flood Insurance
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Different countries 
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)
Biarritz symposium – 18-21 October 2011
Characteristics of Insurance Companies Linked
to Natural Disasters
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Firms may go bankrupt or suffer significant reduction in their
earnings
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An select to exit a specific area
Increase in the rates charged by insurers
Adaptation of the observable patters of natural disasters in
their operational decisions
Challenge in the light of CC = how to deal with a situation
where key-epistemological dimension of CC lies in its “never
happened before” dimension
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Biarritz symposium – 18-21 October 2011
Case Study Experiences
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Bordeaux (France), Varna (Bulgaria), Santander (Spain) and
Plymouth (UK)
Objective = to derive initial behavioural patterns and
investigate the degree of awareness and knowledge on
strategies of hedging natural hazards from questionnaire
surveys addressed to insurance companies
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Biarritz symposium – 18-21 October 2011