7.2.7 Principles of Social Justice
The current Dutch approach to flood insurance can be framed as the ultimate social flood insurance
system. In essence all Dutch citizens are policyholders in the WTS. In a private market based flood
insurance system, as in the UK, that is based on an assessment of ‘pure actuarial fairness’ (O’Neill and
O’Neill, 2012) a large proportion of properties would be either uninsured or uninsurable without
government intervention. Under the current Dutch system, for the vast majority of businesses and
households, flood insurance is not thought about because of the collective assurance that the state will
compensate if the worst happens. Regardless of their risk actual exposure or personal wealth each
member of Dutch society benefits from public flood protection and the WTS compensation promise.
When a risk is as collective as flooding is in the Netherlands, it is wrong that the democratically elected
government of the day is held responsible. A primary function of government is the security of the nation.
Proponents of the current system argue that given the collective nature of the threat, the whole nation
should share the cost of flood compensation through general taxation as a form of social solidarity. In
O’Neill and O’Neill’s classification based on principle of social justice, the Dutch system is one of
extreme solidaristic and risk-insensitive insurance. The state is responsible for all aspects of flood
management and flood compensation in the Netherlands. The risk of moral hazard falls squarely on the
public that bears no direct consequence for their decision to build or live in a high or low risk flood zone.
While the current compensation system has worked to bring about social welfare and economic stability
in the past, those critical of the current system point out that the WTS is unsatisfactory from a social
welfare perspective for two reasons: first, the criteria for triggering a compensation payment are not
clear; second, how much will be offered in compensation is unknown. This is scarcely surprising given
the absolute lack of fixed reserves to pay for the WTS, which is, in effect, only a paper guarantee and
therefore ambiguous until triggered (EP, 2013).
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