PRIVATE FLOOD INSURANCE IN THE NETHERLANDS

1.3  Knowledge  Gap:  Private  Flood  Insurance  in  the  Netherlands?  

As a result of their geography, the Dutch have been compelled to continually challenge existing

strategies in order to find improved ways to manage the threat of flooding. As the public backlash after

the catastrophic 1953 floods demonstrated, avoiding complacency in relation to flooding is as much a

political and economic imperative as it is a social one. Since the fifties, a great deal of technical

knowledge has amassed around both water management and the mechanics of flooding in the

Netherlands. Less, however, is known about the social and institutional aspects of modern flood

compensation and recovery. This is reflected in the preamble to the Delta Commission report, which

states that the primary working assumption regarding the future of Dutch water governance is “that a

safe Netherlands is a collective social good for which the government is and will remain responsible.”

(Deltacommissie, 2008: P.6). The report then goes on to state that while other countries may have

poorer levels of protection, they often have better systems of disaster management, including better

flood compensation arrangements. This is an explicit acknowledgement that the current system, while

highly effective at flood prevention, could be improved in relation to flood compensation. This research

will, therefore, attempt to contribute to three knowledge gaps within this field that are identified below.

First, despite recent attempts to change the current system the debate around public/private flood

insurance has not yet been systematically addressed through the application of evidence based

research. By way of illustration, regarding the future financing of flood risk for new developments, the

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Delta Commission report stipulates as one of its twelve main recommendations that the “costs resulting

from local decisions must not be passed on to another administrative level, or to society as a whole.

[T]hey must be borne by those who benefit from these plans.” (Deltacommissie, 2008: P.12). The report

is not explicit as to how this recommendation can be put into practice under the current WTS system. It

ignores or sidesteps how the current system might be changed or what might replace it to achieve this

policy goal. The introduction of some form of private flood insurance might be an approach to help the

government attain this goal and lead to a greater higher degree of collective risk sharing between the

private and public spheres. Whether it is desirable that public financing of flood risk management

continues when there are private insurance companies making profits by selling what are in fact very

low risk policies is a public policy tension that merits exploration.

Second, with recently proposed changes to the system of Dutch flood compensation it is timely to

revisit the academic literature concerning the effectiveness of national flood compensation systems. As

private insurers play important roles in the operation of many other industrialised countries’ flood

compensation systems it is useful to understand under what circumstances might private sector

involvement in flood compensation in the Netherlands also offer improvements above the current public

system. Free market ideological principle is not a sufficient reason to make such a bold change. It is not,

however, necessarily a polarising choice between private and public responsibility, regulation versus

free market forces. Research has indicated that a mix of actors and multiple joined-up flood risk

strategies is likely to lead to increased flood resilience (Hegger & Driessen, 2012).

Third, the introduction of private flood insurance to the Netherlands is an example of the private sector

attempting to take over areas of responsibility that have been in the public sector for decades. It is a

widely held belief that for sustainable development all societal domains – business, government and

civil society – must play their part to help solve the highly complex environmental problems such as

climate change adaptation. This thesis reflects a microcosm of the challenges and dilemmas this

change will entail. Hopefully the analysis and conclusions that can be drawn from this thesis will shed

greater light on this phenomenon for policy makers and academics alike.