What is needed for effective public-private partnerships in flood insurance in Europe? This was the question given to 35 experts from the reinsurance, insurance, broking and modelling industry, academia and the European Commission as well as the UN, who we had invited to discuss the challenges of providing flood insurance in times of changing flood risk. The workshop was hosted in Munich Re’s (one of the world’s leading reinsurers) headquarters on 12th December 2013. There is an important political context to meeting, as the 2013 EU Green Paper on disaster insurance raised many relevant points. The EU is not they only political body interested in this topic as the UK, the Netherlands and the USA are currently planning to change elements of their flood insurance systems. However, the persistence of such efforts only highlights the lack of progress in terms of innovation and political decision-making.
The meeting itself was an incredibly lively and interactive event, and started with a reflection on the status quo: The rapid increase in global losses from floods has re-intensified discussions among stakeholders about the role of insurance in addressing flood risk. Key aspects in this debate are the affordability of cover, the availability of private insurance, the implications for risk prevention measures, and the roles of government as regulators.
Industry representatives agreed that flood insurance in Europe was not subject to capacity problems, but pointed to lack of demand and political will as barriers for increased penetration. While the industry’s understanding of risk is improving and technical and disciplined underwriting approaches becoming more common, large gaps in understanding of trends and particularly socio-economic drivers of losses remain. A key challenge for the industry was the collaboration with the public sector, where despite several successes a lack of trust and political will prevails.
The discussions highlighted the lack of clarity about the roles of public and private sector players across countries and across local, regional or national scales. Understanding and addressing this gap will be important going forward. The current negotiations about the follow-on agreement of the UN’s Hyogo Framework for Action could provide an opportunity to engage with policy makers on this topic.
With flooding being widely considered as the most preventable natural hazard the question of how insurance can steer prevention is key: Here the practical evidence is limited, despite a long history of successful prevention engagement in industrial insurance. Below are some of the past success and failures of flood insurance that were raised:
•Better flood risk data and improved data sharing across stakeholders, although the availability of historical loss data collected by insurers is not accessible for research or general public.
•Significant increases in prevention investment in some areas.
•Partnerships with the insurance industry can go beyond risk transfer, including data sharing, climate change adaptation policies and spatial planning policy such as the development of building codes and zoning regulations.
•Lack of political will to establish new flood insurance partnerships (examples of Austria and Netherlands)
•Lack of ownership for managing flood risk, and especially a denial of low probability high impact events
•Limited risk awareness of those at risk – despite wide range of efforts
The workshop concluded with each participant outlining one or two priorities for how to move forward in the flood insurance debate in Europe. Some of the aspects discussed in the debate were:
•Greater openness from all sides (and a wider range of stakeholders) about their responsibilities, roles and their limitations.
•Improving the understanding of the economics of flood prevention (costs and benefits) and make this accessible to policy makers and those who can invest into prevention measures
•Public funds should not subsidize insurance premium, but pay for prevention