Future Public Sector Flood Risk and Risk Sharing Arrangements: An Assessment for Austria

TY - JOUR

T1 - Future Public Sector Flood Risk and Risk Sharing Arrangements

T2 - An Assessment for Austria

AU - Unterberger, Christian

AU - Hudson, Paul

AU - Botzen, W. J.Wouter

AU - Schroeer, Katharina

AU - Steininger, Karl W.

N1 - Funding Information: This work was funded by the Austrian Science Fund (FWF) under research grant W 1256-G15 (Doctoral Programme Climate Change – Uncertainties, Thresholds and Coping Strategies). W.J. Wouter Botzen received funding from the Netherlands Organisation for Scientific Research (NWO). The authors thank Hans de Moel, Toon Haer, Philip Ward, and Elco Koks for their useful suggestions about the flood risk analysis. Publisher Copyright: © 2018

PY - 2018/9/28

Y1 - 2018/9/28

N2 - Climate change, along with socio-economic development, will increase the economic impacts of floods. While the factors that influence flood risk to private property have been extensively studied, the risk that natural disasters pose to public infrastructure and the resulting implications on public sector budgets, have received less attention. We address this gap by developing a two-staged model framework, which first assesses the flood risk to public infrastructure in Austria. Combining exposure and vulnerability information at the building level with inundation maps, we project an increase in riverine flood damage, which progressively burdens public budgets. Second, the risk estimates are integrated into an insurance model, which analyzes three different compensation arrangements in terms of the monetary burden they place on future governments’ budgets and the respective volatility of payments. Formalized insurance compensation arrangements offer incentives for risk reduction measures, which lower the burden on public budgets by reducing the vulnerability of buildings that are exposed to flooding. They also significantly reduce the volatility of payments and thereby improve the predictability of flood damage expenditures. These features indicate that more formalized insurance arrangements are an improvement over the purely public compensation arrangement currently in place in Austria.

AB - Climate change, along with socio-economic development, will increase the economic impacts of floods. While the factors that influence flood risk to private property have been extensively studied, the risk that natural disasters pose to public infrastructure and the resulting implications on public sector budgets, have received less attention. We address this gap by developing a two-staged model framework, which first assesses the flood risk to public infrastructure in Austria. Combining exposure and vulnerability information at the building level with inundation maps, we project an increase in riverine flood damage, which progressively burdens public budgets. Second, the risk estimates are integrated into an insurance model, which analyzes three different compensation arrangements in terms of the monetary burden they place on future governments’ budgets and the respective volatility of payments. Formalized insurance compensation arrangements offer incentives for risk reduction measures, which lower the burden on public budgets by reducing the vulnerability of buildings that are exposed to flooding. They also significantly reduce the volatility of payments and thereby improve the predictability of flood damage expenditures. These features indicate that more formalized insurance arrangements are an improvement over the purely public compensation arrangement currently in place in Austria.

KW - Adaptation

KW - Climate change

KW - Flood risk

KW - Insurance

KW - Public sector

KW - Risk reduction

UR - http://www.scopus.com/inward/record.url?scp=85053838718&partnerID=8YFLogxK

U2 - 10.1016/j.ecolecon.2018.09.019

DO - 10.1016/j.ecolecon.2018.09.019

M3 - Article

AN - SCOPUS:85053838718

SN - 0921-8009

VL - 156

SP - 153

EP - 163

JO - Ecological Economics

JF - Ecological Economics

ER -