Flood insurance: from clients to global financial markets

Weather-related natural catastrophes are increasing worldwide in number and intensity, and losses have reached new levels. This represents a challenge that must be faced by governments, the people concerned, and the financial sector, both nationally and globally. Flood insurance is rare in most countries, but the development of solutions to make flood risk more insurable has gained momentum. There is no ideal flood insurance scheme, as each situation is influenced by factors such as risk-adequate premium structure, adverse selection, and general risk awareness. Solutions tailored to the situation in each respective country must be found. While rich countries have to find ways to handle record losses of US$ 100 bn and more, poor countries need micro-insurance to provide people with at least a minimum of financial security. The insurance industry has - through the reinsurance sector - established a system to pay local monetary losses globally. In the wake of extremely expensive catastrophes, a system involving the whole financial market has great potential.