Future public sector flood risk and risk sharing arrangements: An assessment for Austria

C Unterberger, P.G.M.B. Hudson, W.J.W. Botzen, K Schroeer, K Steininger

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Climate change, along with socio-economic development, will increase the economic impacts of floods. While the factors that influence flood risk to private property have been extensively studied, the risk that natural disasters pose to public infrastructure and the resulting implications on public sector budgets, have received less attention. We address this gap by developing a two-staged model framework, which first assesses the flood risk to public infrastructure in Austria. Combining exposure and vulnerability information at the building level with inundation maps, we project an increase in riverine flood damage, which progressively burdens public budgets. Second, the risk estimates are integrated into an insurance model, which analyzes three different compensation arrangements in terms of the monetary burden they place on future governments’ budgets and the respective volatility of payments. Formalized insurance compensation arrangements offer incentives for risk reduction measures, which lower the burden on public budgets by reducing the vulnerability of buildings that are exposed to flooding. They also significantly reduce the volatility of payments and thereby improve the predictability of flood damage expenditures. These features indicate that more formalized insurance arrangements are an improvement over the purely public compensation arrangement currently in place in Austria.

Original languageEnglish
Pages (from-to)153-163
Number of pages11
JournalEcological Economics
Volume156
Early online date28 Sep 2018
DOIs
Publication statusPublished - Feb 2019

Keywords

  • Adaptation
  • Climate change
  • Flood risk
  • Insurance
  • Public sector
  • Risk reduction

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