Natural disasters risk is increasing in several regions around the world as a result of socioeconomic development and climate change. This indicates the importance of establishing affordable and sustainable natural disaster risk management and compensation arrangements. Given the complexity of insuring extreme risks, insurers and governments often cooperate in catastrophe insurance systems. This paper presents a comparative study of the main components and a broad range of indicators of fully private and fully public, as well as public-private (PP) insurance systems, for extreme events, in ten countries. This analysis results in the following nine main recommendations for policymakers who aim to establish new, or improve existing, insurance arrangements for natural disasters: (1) mandatory participation requirements are advisable to achieve a high market penetration rate; (2) adequate monitoring and enforcement mechanisms need to be put in place to ensure compliance with these requirements; (3) the government needs to take responsibility for part of the (extreme) damage in order to keep an insurance system financially viable and affordable; (4) private insurance companies should participate in a PP insurance scheme by selling and administering policies and by covering medium-sized losses; (5) the integration in systems of risk transferring mechanisms is advisable; (6) it is advisable that governments stimulate the building-up of insurers' reserves by providing tax exemptions; (7) risk mitigation policies should be carefully integrated in a natural disaster insurance system; (8) a detailed assessment and mapping of risk provides the basis for an effective mitigation policy; (9) insurance should provide financial incentives for policyholders to take risk mitigation measures.

This study applies Bayesian Inference to estimate flood risk for 53 dyke ring areas in the Netherlands, and focuses particularly on the data scarcity and extreme behaviour of catastrophe risk. The probability density curves of flood damage are estimated through Monte Carlo simulations. Based on these results, flood insurance premiums are estimated using two different practical methods that each account in different ways for an insurer's risk aversion and the dispersion rate of loss data. This study is of practical relevance because insurers have been considering the introduction of flood insurance in the Netherlands, which is currently not generally available

A public-private (PP) partnership could be a viable arrangement for providing insurance coverage for catastrophe events, such as floods and earthquakes. The objective of this paper is to obtain insights into efficient and practical allocations of risk in a PP insurance system. In particular, this study examines how the deductible and stop-loss levels (retentions) for, respectively, the insured and the insurer, relate to the corresponding maximum required coverage and premium amounts under the 99.9% tail value at risk (TVaR) damage constraint. A practical example of flood insurance in the Netherlands is studied in which the (re)insurance could be provided either by a risk-averse (private) or a riskneutral (public) agency, which could result in large differences in premiums.

Damage from weather-related events is expected to increase in the future due to socio-economic growth that increases exposure to natural disasters and anticipated climate change. This paper studies the long-term impacts of climate change and land-use planning on flood risk, with a particular focus on flood risk insurance in the Netherlands. This study estimates the full probability distributions of flood damage under four different scenarios of climate change and socio-economic development for the year 2040. Subsequently, the risk-based (re)insurance premiums for flood coverage are estimated for each of the 53 dyke-ring areas in the Netherlands, using a method that takes into account the insurer's risk aversion to covering uncertain catastrophe risk. On the basis of the results, we can draw four main lessons. First, extreme climate change with a high sea level rise has a higher impact on flood (re)insurance premiums compared with future socio-economic development. Second, (re)insuring large flood losses may become very expensive in the future. Third, a public-private insurance system in which the government acts as a risk-neutral reinsurer of last resort, accompanied by comprehensive adaptation and risk reduction measures, could be a good solution for making flood risk insurance available at an affordable price. Fourth, given the projected increase in flood risk, it is especially important that flood insurance contributes to climate change adaptation.

Award of the VU University. Currently, Botzen is working on projects dealing with natural disaster insurance, climate change adaptation and decision-making under uncertainty. He has published many articles on these topics. Jeroen C.J.H. Aerts is a professor in risk insurance and water management. His research and consultancy activities include a vast number of international risk and water-resources management projects in the Netherlands, Central Asia, Bangladesh, Kenya, Southern Africa, India, Vietnam and the U.S. Professor Aerts has contributed to the IPCC First Assessment Report, Working Group II and is theme coordinator of the Dutch adaptation research programme BSIK-KvR. He has published over 70 peer-reviewed papers.