3.8 CLEAR BOUNDARIES FOR PUBLIC AND PRIVATE SECTOR RESPONSIB...

7.3.8  Clear  Boundaries  for  Public  and  Private  Sector  Responsibility    

In most countries where there is a public flood insurance system that is either mandatory, quasi-

mandatory, or even voluntary, private insurance, while not impossible, will likely struggle to gain market

share. Private flood insurance could slot under the Dutch WTS in a multi-level public-private system,

but this could lead to problems. A private insurance offer would suffer from being crowded out if the

promise remained that the state would also pay compensation. This is indeed a likely scenario. While

the WTS includes an annual maximum limit to the amount of flood compensation the state could

theoretically pay out in flood compensation each year, it is unlikely that this figure would be adhered to.

If the flood were severe enough to merit higher levels of emergency aid or public compensation, it is

probable that the government of the day would opt to offer greater amounts of flood compensation as

refusing to do so would be politically unwise. The WTS in effect a relatively minor part of the actual

unwritten guarantee the Dutch state provides for flood along with other perils, that threaten the

country’s security or future prosperity. Demand for private flood insurance will be curtailed while the

WTS is in operation in its current slightly ambiguous form. Clear boundaries, particularly lower limits, for

government involvement would be recommended in the Dutch context, as is the case in the multi-level

Belgian and French arrangements. In the UK system, the government has no financial responsibility for

flood compensation so the boundaries are very clear and there is no danger of crowding out private

sector insurance products.