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Financial Management of Flood Risk

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Disasters present a broad range of human, social, financial, economic and environmental impacts, with potentially long-lasting, multi-generational effects. The financial management of these impacts is a key challenge for individuals and governments in developed and developing countries. G20 Finance Ministers and Central Bank Governors and APEC Finance Ministers have recognised the importance and priority of disaster risk management strategies and, in particular, disaster risk assessment and risk financing. The OECD has supported the development of strategies for the financial management of natural and man-made disaster risks, under the guidance of the OECD High-Level Advisory Board on Financial Management of Large-scale Catastrophes and the OECD Insurance and Private Pensions Committee. This work has included the elaboration of an OECD Recommendation on Good Practices for Mitigating and Financing Catastrophic Risks and a draft Recommendation on Disaster Risk Financing Strategies  The Financial Management of Flood Risk extends this work by applying the lessons from the OECD’s analysis of disaster risk financing practices and the development of its guidance to the specific case of floods.

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Improving the insurability of flood risk

This chapter provides an overview of possible approaches to improving the insurability of flood and their relative effectiveness based on the experience of many countries. This includes improvements in land-use planning, investments in risk reduction at the community and household levels as well as efforts to improve understanding of flood risk and the need for financial protection. The role of premium subsidies in encouraging demand for flood insurance is also examined, including some of the challenges in eliminating such subsidies over time.

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