Structuring flood insurance in the UK
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Abstract
In the winter of 2013-2014 the south of the UK (London, Oxford) experienced the heaviest rainfall since 1767. Evidence linking these kind of flood events to climate change has put pressure on the UK flood insurance system that is incapable of properly dealing with this kind of flood events. A proposed re-insurance system, FloodRe, is suggested to improve the UK flood insurance system, but lacks the needed risk management incentive to be a constructive solution to the problem. An agent-based model of a flood prone UK housing market area is developed and the working of FloodRe and flood protection measures are explored. Results from experiments run on the model show that the current setup of FloodRe does not affect the UK housing market other than making flood insurance premiums affordable. The proposed flood protection measures are effective but are not themselves affected by FloodRe in any way. It is recommended to do further research in using the information that FloodRe provides to incentivise flood risk management among persons and the government. In this way a FloodRe system can be set up that aids in keeping flood prone areas in the UK affordable and liveable.