4 RESEARCH OBJECTIVE, RELEVANCE AND MAIN QUESTION WHILE THE N...

1.4  Research  Objective,  Relevance  and  Main  Question  

While the Netherlands has invested substantial sums in flood defenses, it is still a high risk and

vulnerable nation as it is situated mostly below sea level in a delta where several major European rivers

discharge and it is bordered by the North Sea to its West. Floods are still the most severe natural

hazard facing the country (Kievik and Gutteling, 2010). It is therefore a contemporary public policy

concern that, in both frequency and severity, globally extreme weather events that result in significant

flooding are increasing. Given that over sixty per cent of the Dutch population live in areas at risk of

flooding and that the most economically important areas such as the Zuidplaspolder near Rotterdam

and Schiphol airport lie several meters below sea level, flood losses could be very substantial

(Jongejan and Barrieu, 2008). Across the country, if any of the major dike rings fail, the projected

losses are presented in the below table.

 

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Dike Ring Area Potential Loss (billion euro)6 Groningen and Friesland 7014 Central Holland 30043 Betuwe, Tieler and Culemborgerwaarden 1021 Hoeksche waard 7

Table 1: Overview of four selected events with flooding of part of the Netherlands (DWW, 2000)

Given this vulnerability, it is assumed that some kind of flood risk compensation, be it public, private or

a mix of both, will increase national welfare because the impacts of flooding are rarely limited to the

immediately affected areas. Economic costs, such as damaged capital assets and lost productivity,

impact whole economic systems. Societal losses, while more difficult to quantify, are keenly

experienced by flooded communities and beyond. However, it is the threat to social welfare caused by

uninsured flooding incidents that is particularly significant. It is often the most vulnerable populations

that are most negatively impacted by flood if some form of universal flood compensation is not available.

Moreover, with recent proposals to change Dutch national flood compensation the question of how it

should be paid for also becomes increasingly relevant. It has been advocated that a more

comprehensive strategy is required to manage flood risk in the future that may include both physical

damage mitigation measures as well as financial risk sharing among societal domains (Jongejan and

Barrieu (2008); Botzen & Van Den Bergh (2008); Aerts & Botzen, (2011); Paudel, (2012)). A systematic

evaluation of whether certain flood risk compensation arrangements are better than others is a question

that is both socially and politically relevant. As such it is the right time to look into different future

scenarios concerning flood compensation including what benefits private flood insurance might offer the

Netherlands and under which conditions this transition might is take place.

To meet the described research objectives of this thesis and to address the identified knowledge gaps,

the following central research question is proposed:

Can the introduction of private flood insurance to the Netherlands be socially and economically

desirable and under what conditions might this take place?

The ultimate objective of this research is to offer a basis from which policy recommendations can be

provided to the Dutch government. To do so, it will examine the potential strengths and weaknesses of

alternative national flood compensation systems to better understand whether the adoption of some

form of private insurance will offer tangible improvements or advantages over the current system and

what those different options might be. It will seek to elucidate under which conditions the Netherlands

would indeed benefit from the inclusion of at least an element of market rigour and should therefore

seriously consider transitioning to a private flood insurance market. It is the hope that this thesis will

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also contribute descriptive and explanatory knowledge around flood compensation aspects of flood risk

governance and recovery arrangements.

The next section will describe the research methodology followed to address the main research

question of this thesis.