7.3.9 Public Reinsurance or State Guarantee
The case can be made that private flood insurance will be most successful within a public private
system where there is a form of division of labour between the state and the private sector. Paudel
recommends that systems that integrate public and private risk transference mechanisms will more
likely lead to long term financial solvency, more affordable premiums and reduce the need for the state
to step in with ad hoc public compensation.
Under a multilayer system usually private firms are only liable for smaller and more common claims
while the state is responsible for losses above a certain level. Paudel research concludes that public
private systems are more cost efficient that public systems because they are able to take advantage of
the skills of private insurance companies to sell and administer flood insurance policies and contribute
68
loss assessment expertise and tools. While the state can contribute financial resilience, without a public
guarantee any private insurance systems can be destabilised by a flood larger than anticipated.
Tax-exempt capital accumulation by insurance companies, as in the UK model, can make the
correlated risks on the Netherlands more attractive to insure. In France, the same is achieved publicly
with the state in the role of reinsurer. To further increase financial stability and economic viability, a
feature of a private Dutch system could include the use of other financial instruments to hedge against
flood risk, such as catastrophe bonds and options. These can be issued either by private insurance
companies, by the Dutch government, or by both.
Bạn đang xem 7. - LET THE MARKETS IN! A QUESTION OF PRIVATE FLOOD INSURANCE IN THE NETHERLANDS?
