C AN C OASTAL E UROPE I NSURE A GAINST C LIMATE C HANGE : A R EVIEW OF E XPERIENCES ON F LOODS AND SHORELINE E ROSION Phoebe Koundouri, Bénédicte Rulleau and Mavra Stithou Biarritz symposium – October 2011

Characteristics of Natural Disaster Risks CC expected to increase the frequency and severity of flooding in certain regions (IPCC, 2007) 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 2Biarritz symposium – October 2011

Severity of Consequences and Economy Financial &/or technological countermeasures Disaster loss Development level Middle income level economies Simple economic structures Complexity of socio- economic structure and interdependency within and across countries increases Source: Benson and Clay 1998; Lester, 2008; Kellenberg and Mobarak, Biarritz symposium – 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 4Biarritz symposium – 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 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 5Biarritz symposium – 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 Vulnerability of small firms 6Biarritz symposium – 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, self- insurance through budgetary allocation Interrelationship between individual behaviour and structure of government policies 7Biarritz symposium – October 2011

Roles of Insurance Assist recovery by 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 8Biarritz symposium – October 2011

Roles of Insurance Flood insurers could play a critical role in risk reduction and avoidance (mitigation) via the use of financial (dis)incentives (Natsios, 1991): Lower deductibles, i.e. lower premiums for properties that take action to reduce their exposure to flood risk, e.g. flood-proofing Bonuses for non-claims Premium pricing related to risk Resilient re-instatement i.e. reconstruction undertaken as a result of insurance payouts that aims to reduce the risk of future losses (Arnell, 2000) Compensation and re-housing in an area of lower flood risk 9Biarritz symposium – October 2011

Roles of Insurance But can also help customers affected by weather events such as floods by: 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 10Biarritz symposium – October 2011

Roles of Insurance And can help the society to adapt and become more resilient (Crichton, 2008): 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 11Biarritz symposium – October 2011

Types of Flood Insurance Biarritz symposium – October 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)

Characteristics of Insurance Companies Linked to Natural Disasters Firms may go bankrupt or suffer significant reduction in their earnings 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 13Biarritz symposium – October 2011

Case Study Experiences 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 14Biarritz symposium – October 2011