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This study offers a Choice Experiment (CE) analysis of geographical scope effects. About 500 stated preference surveys were conducted to estimate willingness-to-pay (WTP) for nature protection in the Netherlands and the Caribbean Netherlands which became part of the Netherlands' constitution just before the survey, providing a unique policy setting. Two version of the CE were implemented with a narrow or a broader geographical scope. Estimation of error correction mixed logit models resulted in the following main insights. First, the hypothesis of scope invariance is rejected since expanding the geographical scope influenced WTP values for nature protection. As an illustration, policies of preventing a degradation of nature have an average WTP of about €20 in the experiment with the smaller geographical scope, while this WTP is not significantly different from zero in the experiment with the more extensive scope. Second, evidence of scope sensitivity of WTP to the levels of nature protection is mixed, and depends on the geographical scope of the CE. We find a sizable WTP for protection of nature in Caribbean Netherlands among citizens of the mainland of the Netherlands, which supports the observed sizable funding of the Dutch government for nature management in the Caribbean Netherlands.

This study offers a Choice Experiment (CE) analysis of geographical scope effects. About 500 stated preference surveys were conducted to estimate willingness-to-pay (WTP) for nature protection in the Netherlands and the Caribbean Netherlands which became part of the Netherlands' constitution just before the survey, providing a unique policy setting. Two version of the CE were implemented with a narrow or a broader geographical scope. Estimation of error correction mixed logit models resulted in the following main insights. First, the hypothesis of scope invariance is rejected since expanding the geographical scope influenced WTP values for nature protection. As an illustration, policies of preventing a degradation of nature have an average WTP of about €20 in the experiment with the smaller geographical scope, while this WTP is not significantly different from zero in the experiment with the more extensive scope. Second, evidence of scope sensitivity of WTP to the levels of nature protection is mixed, and depends on the geographical scope of the CE. We find a sizable WTP for protection of nature in Caribbean Netherlands among citizens of the mainland of the Netherlands, which supports the observed sizable funding of the Dutch government for nature management in the Caribbean Netherlands.

The increasing frequency and severity of natural catastrophes due to climate change is expected to cause higher natural disaster losses in the future. Reinsurance companies bear a large share of this risk in the form of excess-of-loss coverage, where they underwrite the most extreme portion of insurers' risk portfolios. Past experience has shown that after a very large natural disaster, or multiple disasters in close succession, the recapitalization need of reinsurers could trigger a "hard" reinsurance capital market, where a high demand for capital increases the price charged by investors, which is opposed to a "soft" market, where there is a high availability of capital for reinsurers. Consequently, the rising costs of underwriting are transferred to insurers, which ultimately could trigger higher premiums for natural catastrophe (NatCat) insurance worldwide. Here, we study the vulnerability of riverine flood insurance systems in the EU to global reinsurance market conditions and climate change. To do so, we apply the "Dynamic Integrated Flood Insurance" (DIFI) model, and compare insurance premiums, unaffordability, and the uptake for soft and hard reinsurance market conditions under an average and extreme scenario of climate change. We find that a rising average and higher variance of flood risk towards the end of the century can increase flood insurance premiums and cause higher premium volatility resulting from global reinsurance market conditions. Under a "mild" scenario of climate change, the projected yearly premiums for EU countries, combined, are ¿1380 higher under a hard compared to a soft reinsurance capital market in 2080. For a high-end climate change scenario, this difference becomes ¿3220. The rise in premiums causes problems with the unaffordability of flood coverage and results in a declining demand for flood insurance, which increases the financial vulnerability of households to flooding. A proposed solution is to introduce government reinsurance for flood risk, as governments can often provide cheaper reinsurance coverage and are less subject to the volatility of the capital markets.

The increasing frequency and severity of natural catastrophes due to climate change is expected to cause higher natural disaster losses in the future. Reinsurance companies bear a large share of this risk in the form of excess-of-loss coverage, where they underwrite the most extreme portion of insurers' risk portfolios. Past experience has shown that after a very large natural disaster, or multiple disasters in close succession, the recapitalization need of reinsurers could trigger a "hard" reinsurance capital market, where a high demand for capital increases the price charged by investors, which is opposed to a "soft" market, where there is a high availability of capital for reinsurers. Consequently, the rising costs of underwriting are transferred to insurers, which ultimately could trigger higher premiums for natural catastrophe (NatCat) insurance worldwide. Here, we study the vulnerability of riverine flood insurance systems in the EU to global reinsurance market conditions and climate change. To do so, we apply the "Dynamic Integrated Flood Insurance" (DIFI) model, and compare insurance premiums, unaffordability, and the uptake for soft and hard reinsurance market conditions under an average and extreme scenario of climate change. We find that a rising average and higher variance of flood risk towards the end of the century can increase flood insurance premiums and cause higher premium volatility resulting from global reinsurance market conditions. Under a "mild" scenario of climate change, the projected yearly premiums for EU countries, combined, are ¿1380 higher under a hard compared to a soft reinsurance capital market in 2080. For a high-end climate change scenario, this difference becomes ¿3220. The rise in premiums causes problems with the unaffordability of flood coverage and results in a declining demand for flood insurance, which increases the financial vulnerability of households to flooding. A proposed solution is to introduce government reinsurance for flood risk, as governments can often ...

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.

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.

Recent floods in the United States and Asia again highlighted their devastating effects, and without investments in adaptation, the future impact of floods will continue to increase. Key to making accurate flood-risk projections are assessments of how disaster-risk reduction (DRR) measures reduce risk and how much risk remains after adaptation. Current flood-risk-assessment models are ill-equipped to address this, as they assume a static adaptation path, implying that vulnerability will remain constant. We present a multi-disciplinary approach that integrates different types of adaptive behaviour of governments (proactive and reactive) and households (rational and boundedly rational) in a continental-scale risk-assessment framework for river flooding in the European Union. Our methodology demonstrates how flood risk and adaptation might develop, indicates how DRR policies can steer decisions towards optimal behaviour, and indicates how much residual risk remains that has to be covered by risk-transfer mechanisms. We find that the increase in flood risk due to climate change may be largely offset by adaptation decisions. Moreover, we illustrate that adaptation by households may be more influential for risk reduction than government protection in the short term. The results highlight the importance of integrating behavioural methods from social sciences with quantitative models from the natural sciences, as advocated by both fields.

Recent floods in the United States and Asia again highlighted their devastating effects, and without investments in adaptation, the future impact of floods will continue to increase. Key to making accurate flood-risk projections are assessments of how disaster-risk reduction (DRR) measures reduce risk and how much risk remains after adaptation. Current flood-risk-assessment models are ill-equipped to address this, as they assume a static adaptation path, implying that vulnerability will remain constant. We present a multi-disciplinary approach that integrates different types of adaptive behaviour of governments (proactive and reactive) and households (rational and boundedly rational) in a continental-scale risk-assessment framework for river flooding in the European Union. Our methodology demonstrates how flood risk and adaptation might develop, indicates how DRR policies can steer decisions towards optimal behaviour, and indicates how much residual risk remains that has to be covered by risk-transfer mechanisms. We find that the increase in flood risk due to climate change may be largely offset by adaptation decisions. Moreover, we illustrate that adaptation by households may be more influential for risk reduction than government protection in the short term. The results highlight the importance of integrating behavioural methods from social sciences with quantitative models from the natural sciences, as advocated by both fields.

With increasing flood risk due to climate change and socioeconomic trends, governments are under pressure to continue implementing flood protection measures, such as dikes, to reduce flood risk. However, research suggests that a sole focus on government-funded flood protection leads to an adverse increase in exposure as people and economic activities tend to concentrate in protected areas. Moreover, governmental flood protection can reduce the incentive for autonomous adaptation by local households, which paradoxically results in more severe consequences if an extreme flood event occurs. This phenomenon is often referred to as the 'safe development paradox' or 'levee effect' and is generally not accounted for in existing flood risk models used to assess developments in future flood risk under climate change. In this study we assess the impact of extreme flood events for the European Union using a large-scale agent-based model (ABM). We quantify how the safe development paradox affects (1) population growth and the increase in exposed property values, (2) the reduction in investments to flood-proof buildings as public protection increases, and (3) the increase in potential damage should a flood occur. For this analysis, we apply an ABM that integrates the dynamic behaviour of governments and residents into a large-scale flood risk assessment framework, in which we include estimates of changing population growth. We find that the impact of extreme flood events increases considerably when governments provide high protection levels, especially in large metropolitan areas. Moreover, we demonstrate how policy that stimulates the flood-proofing of buildings can largely counteract the effects of the safe development paradox.

With increasing flood risk due to climate change and socioeconomic trends, governments are under pressure to continue implementing flood protection measures, such as dikes, to reduce flood risk. However, research suggests that a sole focus on government-funded flood protection leads to an adverse increase in exposure as people and economic activities tend to concentrate in protected areas. Moreover, governmental flood protection can reduce the incentive for autonomous adaptation by local households, which paradoxically results in more severe consequences if an extreme flood event occurs. This phenomenon is often referred to as the 'safe development paradox' or 'levee effect' and is generally not accounted for in existing flood risk models used to assess developments in future flood risk under climate change. In this study we assess the impact of extreme flood events for the European Union using a large-scale agent-based model (ABM). We quantify how the safe development paradox affects (1) population growth and the increase in exposed property values, (2) the reduction in investments to flood-proof buildings as public protection increases, and (3) the increase in potential damage should a flood occur. For this analysis, we apply an ABM that integrates the dynamic behaviour of governments and residents into a large-scale flood risk assessment framework, in which we include estimates of changing population growth. We find that the impact of extreme flood events increases considerably when governments provide high protection levels, especially in large metropolitan areas. Moreover, we demonstrate how policy that stimulates the flood-proofing of buildings can largely counteract the effects of the safe development paradox.

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.