7.3.5 Sufficient Size of Insurance Community
The Dutch Association of Insurers was correct in its assessment that to offer affordable flood insurance
to the Netherlands, a large insurance community is a probable condition for success. Building a large
enough risk community is a key contributory factor in meeting the basic insurance principles of
mutuality and economic viability. Mutuality is achieved if a sufficient number of people see a benefit
great enough to voluntarily enter into the insurance system. A form of private insurance system would
also been regarded as more publicly legitimate if its mutual base is larger. A system with a larger risk
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community will have more revenues from which to pay for future losses, which is clearly important for
long-term financial viability. In the Netherlands, as things stand, despite the fact that sixty to seventy
per cent of houses are theoretically at high risk of flooding, private insurers will not find it easy to build a
large risk community under a voluntary flood insurance scenario. This is borne out by the experience of
the only private insurer of floods, Neerlandse, which is not selling its insurance policies in particularly
large volumes (EP, 2013). Without sufficient demand for flood insurance private flood insurance will be
the preserve of the most risk adverse members of Dutch society or those who have recently been
exposed to flooding. Without an increase in demand, flood insurance will be a relatively small-scale
business sector for the foreseeable future.
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