Photo: istock/Amsterdam Water Science
By Prof. Jeroen Aerts, Institute for Environmental Studies, VU university Amsterdam
Damage caused by floods will continue to increase in the future and the cost of insurance is likely to become unaffordable.
The increase in flood damage across Europe over the past 20-30 years is mostly due to inadequate undertaking of flood protection measures as well as new residential and infrastructure development in flood-prone areas. Despite strict building regulations in place in many regions, new homes are still being built in high-risk flood areas. As a result, flood damages will continue to rise in the future and insurance premiums are likely to become unaffordable without additional protection measures. This is evidenced by a recent study from the VU University Amsterdam.
In France, for example, the construction of new buildings needs to be compliant with strict building regulations. However, the national government and insurers have few real means to force local governments and homeowners not to build in flood plains. The French government is encouraging households to undertake damage mitigation measures to reduce or even prevent flood damage through the so-called "risk prevention plans” (Plan de Prévention des Risques, PPR) and raising people’s awareness of the risk of flooding.
Rising flood damage
But as shown by the study, this French government campaign does not provide optimal incentives for citizens and municipalities to actually implement flood mitigation measures, such as dikes or raising houses. A similar pattern is also seen in other countries. In Europe the current average flood losses amount to approximately €4 billion per year, and if the current trend continues, the losses could reach an average of €22 billion by 2050. Over two-thirds of this trend is caused by an increase in building in hazardous areas. A third is a result of climate change and extreme weather events.
Citizens in France can sign up for a flood insurance policy to have part of the costs reimbursed in case of flooding. However, knowing that they will be compensated, the French insurance does not provide incentives for people to protect themselves.
Misguided planning decisions
Insurers and governments should cooperate more to ban new construction in hazardous areas or to ensure new properties are built with flood-proofing measures, so that the risks remain manageable and insurance premiums affordable. The recent disasters show that besides climate risks, risks of ill-considered land-use planning need also be considered.
Note to readers:
Prof. Jeroen Aerts is the Director of the Institute for Environmental Studies (IVM), VU University Amsterdam and a Professor of Risk Management, Insurance, and Water Resources Management. He is the project coordinator of the ENHANCE project.
The ENHANCE project has been investigating how existing insurance schemes could be reformed and new schemes designed to utilise the prevention role of insurance and foster multi-sectoral partnerships.
Read about the insights from the ENHANCE case studies on the use of disaster insurance in Europe and how to use multi-sectoral partnerships to improve the risk reduction component of insurance: Insurance instruments and disaster resilience in Europe – Insights from the ENHANCE project