International Review of Environmental and Resource Economics > Vol 7 > Issue 3–4

The Role of Insurance in Reducing Direct Risk - The Case of Flood Insurance

Swenja Surminski, Senior Research Fellow, Grantham Research Institute, London School of Economics, UK,
Suggested Citation
Swenja Surminski (2014), "The Role of Insurance in Reducing Direct Risk - The Case of Flood Insurance", International Review of Environmental and Resource Economics: Vol. 7: No. 3–4, pp 241-278.

Publication Date: 18 Dec 2014
© 2014 S. Surminski
Environmental Economics,  Public Economics,  Financial Services
Flood insuranceDisaster risk reductionFlood risk managementInsuranceClimate changeNatural hazardsAdaptation


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In this article:
1. Introduction 
2. The Flood Insurance Status Quo 
3. What Explains the Current Set-Up? 
4. The Challenge of Rising Flood Losses 
5. Outlook 


The provision of flood insurance is a patchwork, with countries showing varying degrees of penetration, coverage types, demand levels, and design structures. This article explores the current understanding of flood insurance with a specific focus on the ability of flood insurance to contribute to direct risk reduction. The starting point is a consideration of the existing provision of flood insurance, both in established insurance markets and in developing countries. A review of efforts to analyse and explain the use and design of flood insurance highlights how the understanding of supply and demand determinants is steadily growing, while clear gaps also emerge. Particularly the question of utilizing flood insurance in the context of climate change and as a lever for physical risk reduction would benefit from further empirical and theoretical analysis. The article concludes with a reflection on current efforts to reform and design flood insurance and offers some pointers for future research.