7.3.1 Options for the Introduction of Private Flood Insurance
Figure 2: Public-‐Private and Voluntary-‐Mandatory Scenario Matrix
On the X-axis is the extent of private sector involvement in flood compensation. On the Y-axis is
whether flood compensation arrangements are voluntary or mandatory. As can be seen in the above
matrix there are six core scenarios (S1 - S6) for introducing private flood insurance to the Netherlands.
These are described next:
S1: A public flood compensation system that covers all citizens automatically. Private flood insurance
products are free to enter the market and compete for policyholders under this scenario. However,
unless the private system could offer insurances with significant benefits over the public system, the
public arrangement would probably crowd out the private offer in a free market. This is very close to the
current situation with the WTS in the Netherlands.
S2: A private flood insurance system that is voluntary to join with no alternative public compensation
arrangement. This scenario is the free market option that would offer a level playing field for private
insurance companies to compete for flood insurance policyholders. This is the case in the UK.
S3: A mandatory public compensation system. Private insurers would probably not want to enter a
market with a comprehensive public compensation system. Unless the mandatory state backed
compensation scheme was inadequate, it is not likely that households would choose to purchase
private flood insurance cover as well. This is the case in Spain.
64
S4: A mandatory private flood insurance system. This would be the optimal scenario for the introduction
of private insurance as households and businesses would be legally forced to purchase flood insurance
from a private insurance company. This is the scenario proposed by the Dutch Association of Insurers
but it was rejected by the Dutch Competition Authority on anti competitive grounds.
S5: A mixed public private national flood compensation system that is voluntary to join. This is the case
in the USA with the National Flood Defence Program. Their flood insurance policies are administered
and sold by private insurers for a fee but the actual actuarial risk is borne by the US Federal Reserve.
S6: A mixed public private national flood insurance system that is mandatory or quasi-mandatory. This
arrangement is in operation in Belgium and France where flood insurance is bundled with first party
property insurances that are sold by private insurers. Up to a predetermined level, the risk remains with
the private insurers. If losses exceed that level then the state will become liable either via public
reinsurance or a sovereign guarantee.
Without a significant number of changes to the current flood compensation system in the Netherlands,
S1 is the scenario that most closely reflects current reality and is therefore taken as the baseline
scenario against which the following conditions will be compared.
Bạn đang xem 7. - LET THE MARKETS IN! A QUESTION OF PRIVATE FLOOD INSURANCE IN THE NETHERLANDS?