Insurance engagement in flood risk reduction – examples from household and business insurance in developed countries

Abstract. Insurance can be an important mechanism to stimulate flood risk reduction and thus decrease losses. However, there is a gap between the theoretical potential described by academic scholars and the actual engagement of insurers. In the analysis, I have collected examples of insurers' engagement in flood risk reduction, focusing on household and business insurance in developed countries. Insurers engaged either directly, e.g., through co-financing risk reduction, or more indirectly by giving incentives to policyholders or governmental actors to adopt risk reduction measures. I analyzed their engagement with the framing conditions of the market they were acting in, such as market penetration or private or public insurance schemes. I found risk reduction measures like awareness-raising campaigns targeting citizens to be quite common across several countries. There was less insurance engagement in risk reduction measures such as warning or land-use planning, which are perceived to be mainly governmental tasks. The use of risk-based pricing as an incentive for the adoption of risk reduction measures as suggested by academia is difficult in practice, due to barriers such as information gaps on the effectiveness of property-level protection measures and requirements concerning the affordability of insurance. New approaches to overcome these shortfalls include organized data collection on property-level protection measures or the insurance of high-risks for affordable premiums in public–private partnership constellations with the government.