Flood Risk Assessment, Insurance and Damage mitigation Jeroen Aerts, VU University Amsterdam
Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 2
Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 3
Catastrophe flood risk modeling Exposure Flood risk /yr Hazard 4
549 possible storms (MIT) Exposure Flood risk /yr Hazard 5 1/10 1/100 1/500 1/500 Insurance premium
NYC: 549 possible storms
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Flood damage NYC for 549 storms New York City 1/100 1/75 Aerts et al., 2013, Risk Analysis 8
Future Flood risk Exposure 2010 2050 Hazard 9 2010 2050 1/10 1/100 1/500 1/500 Flood risk 2010 /2050 /yr Insurance premiums
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Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 13
Premium Development over Time Spatial distribution of flood risk premiums in per year for 2015 and 2040 under a low economic growth scenario and sea level rise of 24 cm, assuming no adaptation 14
Insurance model The Netherlands Insurers / Re- insurers Damage coverage: max 20bn Euro Households Deductibles 15
Long term insurance Million Euro 100.000 80.000 60.000 40.000 Capital Reserve, only Dike Ring areas RC low growth GE high growth 20.000 0 2015 2035 2055 2075 2095 16
Million Euro 100.000 80.000 60.000 40.000 20.000 Capital Reserve, Scenario 1 RC low growth GE high growth 0-20.000 2015 2035 2055 2075 2095 8 billion Euro damage 12 billion Euro damage 17
Insurance model The Netherlands Government Damage coverage: > $ 5Bn Insurers / Re- insurers Damage coverage: Max. $5Bn Households Deductible: $1Bn 18
100.000 Capital Reserve, Scenario 1 Million Euro 80.000 60.000 40.000 RC low growth GE high growth 20.000-2015 2035 2055 2075 2095 8 billion Euro damage 12 billion Euro damage 19
Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 20
Dry / Wet Floodproofing ODPM, Scotland, 2004 21
Insurance & Building codes NFIP: National Flood Insurance Program $250,000 building coverage only (no contents coverage), for a single-family, one-story structure without a basement 22
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Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 25
Relation Flood event & implementation of pre cautionary measures (River Rhine, Germany) 26
Insured households more often implement mitigation measures Kreibich et al., 2005; Nat Hazards and Earth Sys Sc 117-126 27
What motivates households to implement flood proofing measures? Knowing measure works & idea of implementing measure themselves 28
What motivates households to implement flood proofing measures? Knowing the hazard Probability & impact 29
What motivates households to implement flood proofing measures? Own experience & Activity neighbors 30
Communicating Small Probabilities with Risk Ladders 31 31
Effectiveness of damage mitigation The Netherlands (Max damage in = 11 billion euros) 32
Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 33
Choice Experiment 34 34 34
Demand for insurance under different scenarios (premiums adjusted to risk) Market penetration would be 50% for current conditions (49% in the USA) Will be 60% without government compensation Market for insurance is low for high probabilities > 1/100 35 35
Contents Catastrophe / risk assessment models Using multiple scenarios Future Insurance premiums Lower risk; damage mitigation measures Relation insurance & damage mitigation Willingness to purchase Insurance Other issues 36
Damage to critical infrasrcuture Improve flood risk assessments, special focus on: Industrial/port areas Indirect effects: business interruption and supply-chain disruption Criticial infrastructure (e.g. energy/water supply) De Kort, 2012 Thailand, 2011 37
Murphy Oil Spill, 2005 New Orleans 38
Economic losses: case Rotterdam Largest harbour in Europe Infrastructural hub: Gateway to Europe Soruce: Port authority of Rotterdam webiste 39 39
Economic losses Port of Rotterdam 40
Results economic losses model Flood damage in billions Euro Return period Direct damage Indirecte losses Total losses 1/10 0.22 0.58 0.80 1/100 0.44 1.25 1.69 1/1,000 0.76 2.22 2.98 1/2,000 0.92 2.75 3.68 1/4,000 1.10 3.35 4.45 1/10,000 1.88 6.09 7.97 41
Thanks for your attention! 42 42