7.3.7 An Active Financial Role for Government
If the Dutch system for flood compensation were to change to include a greater role for private
insurance in flood compensation, the state should retain responsibility for an upper tier of risk so it still
has ‘skin in the game’. Keeping the government partly liable for flood losses is that moral hazard on the
part of the government can be limited. This has been an ongoing problem in the UK.
67
The Dutch Governments could also help create the conditions for a viable private flood insurance
industry. Botzen (2010) calls for an active role of the government to overcome market failures that
typically challenge private insurance of natural disasters which include capital shortages, risk
prevention incentives, enforcing strict building and planning regulations and setting up condition to
achieve sufficient market penetration to keep premiums affordable. For example, the Dutch could follow
the UK model and French NAT/CAT by encouraging companies to build up capital reserves through tax
exemptions - so called equalisation reserves. This helps stabilise potential yearly fluctuations in losses
and mitigates against insurance companies going bankrupt. Policies that lead to a financially robust
private flood insurance sector could mean that it is less likely that public funds would be used after a
major flood. How far private insurance displaces public compensation is disputed. After all the recent
natural catastrophes huge amounts of public money have been channelled to the victims by
governments (Jongejan and Barrieu, 2008; EP, 2013). The extent to which private insurance is of
benefit after a major catastrophe is an exciting avenue for further research. An on-going and active role
for the state in a role that does not crowd but supports private sector initiatives is a strong condition for
the viability of future of private flood insurance in the Netherlands.
Bạn đang xem 7. - LET THE MARKETS IN! A QUESTION OF PRIVATE FLOOD INSURANCE IN THE NETHERLANDS?