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Flood risk perceptions and the willingness to pay for flood insurance in the Veneto region of Italy
(2019)
The floodplain of the Veneto region (north-east Italy) is one of the most inhabited and economically competitive urban landscapes in Europe. Moreover, recent flood events have caused millions of Euros in damage across the region. Due to the combined influence of climate change and socio-economic development, flood impacts are expected to grow. Therefore, it is important for all flood-prone individuals to actively manage and limit flood risk through property-level flood risk management as part of an integrated flood risk management strategy. This is in line with the calls for wider community engagement in risk management in the Sendai Framework for Disaster Risk Reduction and the Sustainable Development Goals. Therefore, an online-survey of Veneto region residents was conducted asking questions regarding flood risk perceptions, preparedness, and preferences towards flood insurance via self-stated willingness to pay (WTP). Our analysis provides an initial indication that while flood risk knowledge is high, it may not be sufficient to encourage proactive risk management. From the WTP values provided people seem reluctant to buy insurance. However, many respondents expressed that a compulsory insurance system may be acceptable. In such a scheme the estimated insurance premium could fall to between (sic)26 and (sic)42 per year, as compared to, potentially, (sic)800 under risk-based premiums, which falls within the majority of WTP estimates provided ((sic)0-(sic)250). Overall, we identify areas of future research that are critical for the better design of risk management policies, supporting the insurance companies in risk management and for recommendations regarding property-level risk management.
Flood risk will increase in many areas around the world due to climate change and increase in economic exposure. This implies that adequate flood insurance schemes are needed to adapt to increasing flood risk and to minimise welfare losses for households in flood-prone areas. Flood insurance markets may need reform to offer sufficient and affordable financial protection and incentives for risk reduction. Here, we present the results of a study that aims to evaluate the ability of flood insurance arrangements in Europe to cope with trends in flood risk, using criteria that encompass common elements of the policy debate on flood insurance reform. We show that the average risk-based flood insurance premium could double between 2015 and 2055 in the absence of more risk reduction by households exposed to flooding. We show that part of the expected future increase in flood risk could be limited by flood insurance mechanisms that better incentivise risk reduction by policyholders, which lowers vulnerability. The affordability of flood insurance can be improved by introducing the key features of public-private partnerships (PPPs), which include public reinsurance, limited premium cross-subsidisation between low- and high-risk households, and incentives for policyholder-level risk reduction. These findings were evaluated in a comprehensive sensitivity analysis and support ongoing reforms in Europe and abroad that move towards risk-based premiums and link insurance with risk reduction, strengthen purchase requirements, and engage in multi-stakeholder partnerships.