Fit for Purpose and Fit for the Future? An Evaluation of the UK's New Flood Reinsurance Pool

Flood Re is widely hailed as an innovative approach to disaster risk insurance. This article offers a mixed‐methods evaluation of the new pool, asking whether it is “fit for purpose” and “fit for the future.” The investigation considers the roles of the public and private sectors, risk modeling and...

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Bibliographic Details
Published inRisk management and insurance review Vol. 21; no. 1; pp. 33 - 72
Main Author Surminski, Swenja
Format Journal Article
LanguageEnglish
Published Malvern Blackwell Publishing Ltd 01.03.2018
Subjects
Flood control
Flood insurance
Insurance pools
Private sector
Public sector
Reinsurance
United Kingdom > UK
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Summary:Flood Re is widely hailed as an innovative approach to disaster risk insurance. This article offers a mixed‐methods evaluation of the new pool, asking whether it is “fit for purpose” and “fit for the future.” The investigation considers the roles of the public and private sectors, risk modeling and risk communication, technical underwriting, distributional aspects, and the behavioral implications of Flood Re, particularly with regards to risk reduction and prevention. The article concludes that the new pool is a transitional reinsurance arrangement that supports the private insurance market and secures affordability of flood insurance in the United Kingdom through premium subsidies. However, this approach is likely to come under pressure in the face of rising flood risk as it fails to incentivize flood risk management and risk reduction efforts.
Bibliography:Swenja Surminski is at the Grantham Research Institute on Climate Change and the Environment, London School of Economics. This article was prepared for the “Improving Disaster Financing: Evaluating Policy Interventions in Disaster Insurance Markets” workshop held at Resources for the Future on November 29–30, 2016. The author would like to thank the sponsors of this project: the American Academy of Actuaries, the American Risk and Insurance Association, Risk Management Solutions, the Society of Actuaries, and XL Catlin. The author also would like to acknowledge the financial support of the UK Economic and Social Research Council (ESRC) through the Centre for Climate Change Economics and Policy, and of the Grantham Foundation for the Protection of the Environment through the Grantham Research Institute on Climate Change and the Environment. The author thanks Joel Hankinson for his input and assistance.
ISSN:1098-1616
1540-6296
DOI:10.1111/rmir.12093