2.1 HISTORICAL CONTEXT FROM CENTURIES-OLD PRACTICES OF BUILDING D...

7.2.1  Historical  Context  

From centuries-old practices of building dunes and dikes to more recent advanced modern engineering

solutions such as the Delta Works, the Dutch have developed great expertise in flood protection. To

appreciate its full extent, it is necessary to understand a little about the history of water governance in

the Netherlands. From the thirteenth century to this day the Dutch water boards have been heavily

involved in local flood protection. As independent, democratically elected local institutions they are

credited with being the basis for the decentralised nature of the current Dutch political system. Their

purpose was twofold: first, to maintain drainage of what would otherwise be bog land so that it could be

productively used for agriculture; and second, to

protect the land from the ever-present threat of river

flood or sea incursion. Twenty-four water boards

remain today. Among their primary responsibilities is

the management and maintenance of water barriers

such as sand dunes, dikes, and levees

(Waterschappen, 2013). Once able to issue fines,

the water boards today are still able to levy local

taxes which has the effect of limiting the possibility of

free-riding behind publicly financed flood defenses

(Jongejan & Barrieu, 2008). At the heart of public

investments in substantial flood protection are a

series of dike rings built to protect the conurbations

at flood risk. Depending on flood risk and economic

impact the dike rings are built to different safety

standards. These are shown in the below map.

Figure 3: Flood Ring Safety Standards in the

Netherlands (Jak and Kok, 1999)

Today, central government has a key role in directing

public investment in flood protection. On average the

Dutch spend €550 million per year against national

coast and river flooding. If the recommendation from the Delta Commission and the National Water

Plan are implemented, annual spending may increase to between €1.2 and €1.6 billion, of which a large

proportion will be spent on strengthening flood protection measures in anticipation of severe weather

events expected to result from climate change. Responsibility for flood defence is shared between

national and regional public authorities. At the national level, it is the Ministry of Transport, Public

Works and Water Management and its executive agency, the Directorate General for Public Works and

Water Management. At the regional level, three different authorities are involved: the water boards and

the provincial and municipal branches of local government (European Commission, 2009).

In the decades following the 1953 flood successive governments have reassured the Dutch public that

everything necessary was being done to protect the country from future flood catastrophes. This public

commitment to reducing flood risk led to numerous public infrastructure projects to protect the country

against flood that culminated in the famous Delta Works. That many citizens consider the Netherlands

to be practically flood proof is testament to the societal embeddedness of this narrative. In juxtaposition

to this reassuring public message the insurance industry has been more equivocal with regard to the

flood risk the country faces (EP, 2013). In 1954, due to the large losses incurred after the previous

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year’s flood, members of the precursor organisation to the Dutch Association of Insurers unanimously

withdrew their flood insurance products from the Netherlands. The given reason at the time was that

the threat of flood is so high and that the extent of losses incurred would be so high to be uninsurable

on a commercial basis. This withholding of flood insurance in the Netherlands continued until instances

of flooding in the early 1990s prompted the Dutch government in 1995 to enter into a consultation with

the Dutch Association of Insurers (Verbond van Verzekeraars) to examine the possibility of creating a

new flood compensation arrangement.

Instances of flooding in the early 1990s prompted the Dutch government in 1995 to begin negotiations

with the Dutch Association of Insurers (Verbond van Verzekeraars) to examine the possibility of

creating a new flood compensation system arrangement with private sector involvement. The result of

the consultation was a proposal to create a natural calamities fund to be financed by levies on existing

property insurances by bundling flood risk with fire insurances. Under this system, as it is necessary to

take out fire insurance in the Netherlands to secure a mortgage, flood insurance would have been a

quasi-mandatory insurance. This proposal was, however, rejected by the Council of State on the basis

of Article 21 of the Dutch constitution that states that government is responsible for the ‘habitability of

the land’. In their objection they drew attention to the risk of moral hazard from government. The

Council had concerns that if the government were able pass such a fundamental public responsibility to

the private sector they might neglect their duty to invest in flood defenses. Failing to invest in flood

defenses and an over-reliance on private flood insurance as has been observed in other countries,

most notably the UK has been suspected of this (Botzen, 2010). The Council also cautioned against

excessive premiums and the profit motive of the private insurance sector. It also doubted the principle

of flood risk being added to fire insurance. Following the Council’s negative advice, the proposal was

dropped and the members of the Dutch Association of Insurers (95% of the Dutch insurance industry)

have continued to exclude flood coverage from their standard insurance portfolios (Jongejan and

Barrieu, 2008).

In 1998 the covenant by members of the Dutch Association of Insurers not to underwrite flood risk was

rescinded due to European Union competition law. Under pressure to clarify flood compensation

arrangements, the Calamities Compensation Act (WTS) was enacted in the same year. As primary

legislation, the WTS was introduced to put an end to the uncertainty around how the government would

respond to large-scale natural disasters including flooding. Compensation through the WTS is limited to

freshwater floods. Sea floods, for example, storm surges, are specifically excluded by the WTS as the

risk is regarded too large and unpredictable. Though floods have been technically privately insurable in

the Netherlands since 1998, flood insurance has not been readily available to the general public.

Consequently, even though it explicitly excludes damages that could have been privately insured (EP,