Reflections on the current debate on how to link flood insurance and disaster risk reduction in the European Union

Abstract

Flood insurance differs widely in scope and form across Europe. Against the backdrop of rising flood losses, a debate about the role of EU policy in shaping the future of this compensation mechanism is led by policy-makers and industry. While the question of supply and demand is at the core of the debate, we argue that another key dimension is often overlooked: how to use insurance as a lever for risk reduction and prevention efforts. We investigate whether and how current EU policies influence flood insurance and how this interplays with the national policy level. First, we consider affordability, availability, and risk reduction linkages in an EU context, and then gather insights from two contrasting cases of flood insurance: the UK, where flood insurance provision is widely available, but subject to ongoing reform; and the Netherlands, where several efforts to introduce broader flood insurance coverage have failed. This is followed by an analysis of how EU policy could help address the challenges at member state level, based on a stakeholder workshop discussion. We conclude that there is wide agreement that a complete harmonization of flood insurance offering across the EU is unlikely to be effective. However, there is clear scope for EU policymakers to play a greater role in linking risk transfer and prevention, beyond existing channels, to ensure an integrated approach to flood risk management across the EU.