7.3.10 A Standalone National Flood Risk Model
To date, according to Milan Simic, managing director of catastrophe modelling firm AIR Worldwide,
there has been no demand for a risk model because no company has been offering commercial cover
(Insurance Insight, 2013). If flood insurance is to be a viable product in the Netherlands it will have to
be back by sophisticated models. This will be expensive to develop. Given the economics of selling
flood insurance it might be preferable. If these cost could be shared among the industry rather than
each company developing or buying a proprietary flood risk model and assessment tools (EP, 2013).
Sharing these costs was a justification from the Association of Dutch Insurer to offer a mandatory
insurance product through its members. As this proposal was rejected, it remains to be seen if private
insurers individually see sufficient market potential to follow the lead of Neerlandse and invest in
building their own model for the Netherlands. Without such a model it will be very difficult for companies
to offer risk based premiums and they would have to rely on some form of flat rates instead. Individual
insurance companies would probably have to underwrite flat rates themselves as finding a Lloyd’s
underwriter (or other reinsurer) could be difficult if the premiums are set at rates considered affordable
in the Dutch market (EP, 2013).
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