Evaluating public flood risk prevention tools, from the perspective of the insurance market

Transcription

1 EU WG F Flood Mapping Workshop Brno Czech Republic Theme 6 - Results, information, reporting Results and information to be available to public and to EC (Chapter IV, Article 10 of Dir 2007/60/EC) Evaluating public flood risk prevention tools, from the perspective of the insurance market Roland NUSSBAUM Mission des sociétés d assurance pour la connaissance et la prévention des risques naturels, MRN, Paris, FR representing CEA, the European insurance and reinsurance federation, Brussels, BE 1

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3 OUTLINE of the presentation Communications launched by EC Commission, referring to the necessary link between prevention and insurance Flood insurability in the EU Country practices, where insurability is subject to compliance with prevention requirements OEDC overview USA UK France Market expectations linked with the implementation of the Flood directive 3

4 Communications launched by EC Commission in 2009 COM(2009) 39 Towards a comprehensive Climate change agreement in Copenhagen («post Kyoto») A multilateral insurance pool to cover disaster losses should be explored to complement existing funding mechanisms in case of climate related natural disasters ( 4.2. p. 9). COM(2009) 82 A Community approach on the prevention of natural and man made disasters COM(2009) 84 EU strategy for supporting disaster risk reduction in developing countries Support for implementing market based insurance mechanisms can also be a tool to improve public awareness of disaster risks and should give incentives to risk reducing behaviour. (p. 8) Governments could provide incentives/support to promote responsible corporate behaviour and PPP, which are particularly important to developing (affordable) insurance mechanisms against disasters. (p. 9) COM(2009) 147 White Paper Adapting to climate change: towards a European framework for action see next slide 4

5 ( 4. INSTRUMENTS - FINANCING, p. 14) 5

6 1. Flood insurability in the EU 6

7 (Flood) insurability General criteria, for a risk to be insurable: Assessibility, Randomness, Mutuality Economic feasibility + especially for cat risks: Non systemic Not affected by information asymetries: adverse selection & moral hazard EU competition case law: A coverage that finds reinsurance on private markets Main practical criteria: Availability and affordability of private coverage Availability of risk knowledge and modelling techniques 7

8 Types of NatCat extended coverage offers their level of penetration on EUR national markets (rem) Intensity of colour according to market penetration of flood and/or EQ extended coverage 8

9 Insurance services as main risk transfer solution on the Fa r m e r c u r v e : f r e q u e n c y = f (i n t e n s i t y o f l o s s e s ) frequency Personnal responsibility Collective responsibility/ solidarity Market B2B/B2C Solidarities: at nation level at larger level scales Mitigation & financial retention by the individual (deductible) Micro/meso Contractual mutualization schemes at risk basin level (eg. Floodplain) + mitigation and insurance enginering services Mutualization on the insurance services market PPP + private reinsurance capacity incl. ART PPP State as reinsurer of last resort IF NECESSARY macro or sces of claims management by direct insurance market EU Solidarity ( EUSF - art ECT) Magnitude / cumulated loss per par year of occurrence 9

10 Treaty establishing the European Communities Economic and monetary policy (Art ) Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken. 10

11 2. Country practices, where flood insurability is subject to compliance with prevention requirements studies on public prevention policies and their links to insurance USA - UK - FR 11

12 2.1. OECD Studies Environmental risks and Insurance A comparative analysis of the role of insurance in the management of environment related risks, Policy issues in Insurance, 2003 Prevention and insurance policies for natural catastrophes in France, 2006, OECD studies on risk management Policy handbook on natural hazard awareness and disaster risk reduction education,

13 2.2. USA: Communities rating system (CRS) - NFIP (FEMA) Respective contributions of main components in CRS 9% 5% 39% Awareness raising Flood zoning and regulations Preparedness Mitigation 47% 13

14 2.2. USA: Communities rating system (CRS) - NFIP (FEMA) Components of the criterion to be rated their French equivalents, if any Flood zoning and regulations CRS Mapping and regulation : points are credited for actions targeting results over the minimum standards required at national level. 39% Equivt tools in France Deliver additionnal data on hazard, from modelling and further studies EPTB Floodable areas devoted to uses compatible with their exposure (recreation and sports areas, natural areas ) réserves naturelles ) or affected by severe construction limitations Flood expansion areas PPR regulations Additionnal requirements, according to exposure, for land use and construction rules, with specific treatment for critical infrastructures and seecoast protection PLU, SCOT Danger studies, PPI, PCA, Coastal regulation Discourage new constructions and limit the density of existing ones in exposed zones PPR, PLU, SCOT Regularly update hazard and regulatory zoning, as well as insurance data No (Flood directive?) Take into account runofff/flash flood risk, socification of pluvial sewage networ, elaborate of a management plan on pluvial water sources PPR flash flood, run off Municipality, etc Utilities operator 14

15 2.3. UK: Statement of principles by the Association of British Insurers (ABI) the minimum level of protection that would enable insurers to offer cover at normal terms for residential properties is a 0.5 % annual probability of flooding, after taking climate change into account (2003) REVIEW OF (SUMMER 2007 FLOODS AND) THE STATEMENT OF PRINCIPLES ON FLOOD INSURANCE (2008) At the meeting the ABI and Government also formally confirmed a UK-wide review of the Statement of Principles to ensure it is up to date and fit for purpose. The Government and the ABI both want to ensure that flood cover remains as widely available as possible for the public. The Statement of Principles commits insurers to continuing to offer flood insurance to existing customers where the flood risk is adequately managed. However following the major floods of summer 2007, and in light of the increasing number and extent of floods linked to climate change, the Government and the insurance industry have begun work to undertake a fundamental review of the statement. 15

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17 2.4. FR: Adequacy of PPRNI, as public prevention policy tools linked to insurability MRN studies PPRNI = Plan de Prévention des Risques Naturels Inondation 17

18 A subject raised from different perspectives - already 4 main reports since

19 Objectives of MRN study Identify, from an insurer s perspective based on available public data : Most exposed municipalities and river basins : a kind of PFRA), The need and scope for a PPRNI (FRMP) Assess the situation of municipalities and floodplain management authorities, vis-à-vis the progress of : PPRNI Other tools for public flood risk prevention policy By the way, deliver a diagnosis on availability and access to public data sources for stakeholders (GASPAR & CARTORISQUE). 19

20 PPRNI from an insurance perspective Collective vulnerability Negociation on public prevention policy Individual vulnerability Insurer Insurance contract Negociation Customer risk mgt objectives Via insurance trade associations Public authorities Insured 20

21 Approaches of the MRN study Principle of cooperation with public authorities 1. Evaluation of public data available, for a stakeholder operating at national scale 1. Assessment of a. flood exposure criteria used b. PPRNI situation against these criteria 1. Experimental case studies Preliminary conclusions and further steps 21

22 Availability of river flood zoning public data as of 01/01/09 Municipalities: With flood zoning available through CARTORISQUE from other public sources Without flood zoning, Presence of at least one river no river at all 22

23 Availability of PPRNI regulatory zoning data Few PPRNI are available so far on numeric format through CARTORISQUE. 23

24 Assessment of flood exposure, criteria 1 2 NatCat declaration and loss record Municipalities without PPRNI Municipalities with PPRNI on municipalities with code PPRNI in GASPAR 24

25 Comparative evolutions of total claims amount and number of PPRNI adopted/prescribed 25

26 Assessment of flood exposure criterion 3: municipality assumed «at flood risk» Municipalities with PPRNI* Municipalities «at flood risk» YES NO YES NO Total Total * Municipalities with code PPRNI in GASPAR (be it prescribed or approved) 26

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28 Assessment of flood exposure criterion 4: asset exposure to floods estimate of the number of exposed: dwellings professionnal activities With flood zoning: usual GIS methods no flood zoning available : assets located below a statistical distance to closest river A rough but consistent method for PFRA, which can be refined with appropriate DEM / DSM 28

29 Constructing a set of most exposed municipalities a) On territories where hazard zoning is available 30 % of metropolitan population 25 municipalities of more than inhabitants 29

30 Constructing a set of most exposed municipalities b) On territories where hazard zoning is not available Municipality ~2 500 municipalities 30 % of population 11 municipalities of more than inhabitants *Méthode reposant sur la distance de la tache urbaine au cours d eau Situation of most advanced PPRNI on considered municipality BORDEAUX PPRNI APPROUVE LILLE PPRNI PRESCRIT DEPUIS PLUS DE 4 ANS HAVRE (LE ) PPRNI PRESCRIT DEPUIS PLUS DE 4 ANS REIMS SANS PPR OU EQUIVALENT TOULON PPRNI EQUIVALENT APPROUVE GRENOBLE PPRNI APPROUVE BREST SANS PPR OU EQUIVALENT MANS (LE ) PPRNI APPROUVE LIMOGES PPRNI APPROUVE VILLEURBANNE PPRNI EQUIVALENT APPROUVE ET PPRNI PRESCRIT ROUEN PPRNI PRESCRIT DEPUIS PLUS DE 4 ANS 30

31 NI d u b ass P PR in d NI d e l O u ba rbie s u sin d P PR NI d e l a Lo u ba ire ssi n P PR de l NI d Ill u ba s si n P PR du D NI d u ba oub s ssin de la som m PPR e PPRNI in a floodplain management approach towards FRMP? 31

32 Experimental case studies Communes Agglomérations Syndicats de rivière 32

33 Experimental case studies Summary of findings Intensive production of knowledge on hazard and asset exposure, both from State and Territorial side On PPRNI: Old procedures remaining in force Consistency of territorial coverage in question Important contribution to LUP Role of greater cities councils in : Alternative / complementary approaches Run off / flash flood risk management (SCOT); Preparedness (PCS and early warning). 33

34 4. Final remarks linked with the implementation of the Flood directive PFRA 2011 «exposure analysis» Basic need for the development of flood (re)insurance market Search for simple methods, GIS based, focused on asset locations Develop cooperation and PPP opportunities with insurance market associations Need for accurate homogeneous geographic reference data (water systems, DEM/DSM) to improve the methods at a later stage FHM FRM 2013 «risk maps» for business use Numeric FHM on 3 different scenarios are very important input for insurance business activities (underwriting, prevention advice, portfolio management and reinsurance, solvency stress tests ) (Re)insurers may develop on top of that input their own probabilistic loss modelling tools FRMP 2015 CBA is the basis for risk rating: average annual loss, after probabilistic simulation on a sustainable long period, at var. scales Methods and results to share between LU planners, territorial risk managers, risk transfer professionnal Insurability will largely benefit from this dynamic holistic approach 34

35 Thank you for your attention