7.4.4 Randomness
As for the principle of randomness, it is simpler for insurers to satisfy this condition in the Netherlands.
Dutch insurers can opt out of offering insurance on properties that are at high risk of recurrent flooding.
This has the effect of excluding high-risk properties from the risk community, which increases the
randomness factor. Removing risk with a high flood return period into a separate community or pool (as
has been proposed in the UK with ‘Flood Re’) also enhances the condition of mutuality i.e. members of
the same risk community are exposed to similar levels of risk and the rules under which they might be
compensated are also comparable. This is important for an insurance system to be regarded as fair and
legitimate by its participants.
It might, however, be argued that flood risk in the UK is far less correlated than in the Netherlands. The
principle of mutuality is therefore easier to achieve there. Compared to the Netherlands, the risk of
flooding in the UK is far lower; however, due to the UK topography and relatively lower investment in
flood protection, floods occur more frequently. Riverine floods are the most common types of flood in the
UK, particularly compared to the Netherlands where unplanned river floods are rare (Kok & Barendregt,
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