French Insurance and Flood Risk: Assessing the Impact of Prevention Through the Rating of Action Programs for Flood Prevention

French insurance is part of a public-private partnership with the French State to compensate flood-related damages, and there is growing concern among insurers about damaging climatic events. To promote preventive actions as well as to take them into account in flood risk assessment, insurers have recently expressed the need to develop a rating system of preventive actions. This study identified Action Programs for Flood Prevention (Programme d’Action pour la Prévention des Inondations—PAPI) as the key French public policy instrument: they provide an overview of the diversity of actions that are conducted locally at the relevant risk basin scale. A database of all intended actions in the 145 launched PAPIs was constructed and the actions were coded (88 codes). The analysis consisted of two steps: (1) We conducted an expert valuation using the Analytic Network Process and the Analytic Hierarchy Process, aiming at creating an experimental national rating system. The results show the importance of implementing an integrated strategy that particularly emphasizes land use planning and urban planning. This appears even sounder as individual actions show relatively limited effectiveness. (2) The ratings of actions were applied to each PAPI according to their implemented actions. The resulting scores for individual PAPIs, as local risk coping capacity indicators, show great variance ranging from 8 to 324 points. This confirms the need to take prevention into account in flood risk assessment.

Experimental Evidence for Coverage Preferences in Flood Insurance

We used a hypothetical choice experiment to estimate the effect of dwelling value and coverage limits on the probability of purchasing flood insurance while holding the probability of flooding and insurance price constant. The results indicate that demand for flood insurance is negatively associated with the amount of insurance coverage. For people assigned higher-valued dwellings, however, the opposite effect is observed. Since more coverage is generally preferred to less, all else being equal, differences in purchase probability dependent on dwelling value indicate an inconsistent approach to home protection. The higher probability of purchasing flood insurance from people in higher-valued dwellings may indicate an investment into the home as a financial asset, a strategy that is not observed to the same extent among people in lower-valued dwellings. This suggests that use of coverage limits may be differentially preferred based on dwelling value, such that low coverage insurance may have lower uptake for those in high-valued dwellings. As Canada evaluates a national flood insurance program, this research suggests that variable coverage maximums could be a way to increase accessibility and uptake of insurance.This research shows an inconsistent demand for flood insurance, dependent on dwelling value and independent of income.

Barriers to Insurance as a Flood Risk Management Tool:Evidence from a Survey of Property Owners

By using risk-adjusted price signals to transfer responsibility for property-level flood protection and recovery from governments to property owners,flood insurance represents a key tenet of the flood risk management(FRM)paradigm.The Government of Canada has worked with insurers to introduce flood insurance for the first time as a part of a broader shift towards FRM to limit the growing costs of flooding.The viability of flood insurance in Canada,however,has been questioned by research that disputes the utility of purchasing coverage by property owners.This study tested this assumption by drawing on public opinion survey data to assess factors that influence decisions about the utility of insurance.The findings reveal that Canadians have limited knowledge of flood insurance coverage,exhibit a low willingness-to-pay for both insurance and property-level flood protection measures,and expect governments to shoulder much of the financial burden of flood recovery through disaster assistance.