In the context of increasing losses from floods, a growing number of countries have, or are establishing or expanding, public-private insurance programmes to support the availability of affordable insurance coverage for flood risks. The design of these programmes differs in terms of the type and scope of coverage provided, role of the programme in the market and approach to premium pricing. This chapter examines the implications of different programme design choices on four important programme objectives: (i) achieving broad flood insurance coverage; (ii) leveraging private insurance sector expertise and capacity; (iii) minimising impacts on public finances; and (iv) encouraging and supporting flood risk reduction.
Financial Protection Against Catastrophic Risks
Floods, Fires and Other Major Risks
Abstract
Flooding occurs when there is an overflow of water that submerges normally dry land. There are different types of floods, including: (i) flash or pluvial floods that are usually caused by excessive and/or intense precipitation; (ii) riverine or fluvial floods that are caused by an overflow of water from a stream or river channel, usually caused by excessive precipitation or snowmelt; and (iii) coastal floods and storm surge, which are an abnormal rise in sea level that is usually associated with high winds due to a storm or cyclone (OECD, 2016[1]).1 Flooding can cause significant damage to buildings and contents. The infiltration of water can impact the structural integrity of buildings and damage electrical wiring. It can cause irreparable damage to flooring as well as to furniture, appliances and other contents, including as a result of the spread of mould. Riverine flooding can lead to long periods of water inundation, particularly in areas that are relatively flat. Floods in areas with varying elevations and storm surges can lead to high-velocity water flows that have the potential to result in more significant damages.
Economic losses resulting from floods have increased. Average annual economic losses from flood events in OECD Member and accession candidate countries were almost 78% higher in the first few years of this decade (2020-2024) relative to the previous five years (2015-2019), in constant 2024 USD, although this is likely the result of increases in both exposure and hazard (Figure 5.1).2
Note: Includes all events classified as floods in the Swiss Re sigma database.
Source: OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)
Continued development in high-risk areas could lead to increasing flood risk. One recent analysis using earth observation to identify changes in human settlement patterns found that there was continuous and rapid development in flood zones between 1985 and 2015 and that human settlement growth is much higher in the most hazardous flood zones in many regions (Rentschler et al., 2023[2]).
More frequent severe precipitation, sea-level rise and other factors could increase the level of flood hazard in the future. Many OECD Member and accession candidate countries are expected to face increasing flood hazard under future climate conditions (Figure 5.2). One recent analysis found a high likelihood of climate-driven intensification of floods as well as convective storms and tropical cyclones (where exposed) in Central and Western Europe, including Austria, Czechia, Germany, Luxembourg and Poland, and in East and Southeast Asia, including Indonesia, Japan, Chinese Taipei and Thailand (Banerjee et al., 2024[3]). It also found a medium likelihood of hazard intensification in many other countries and regions, including Belgium, Brazil, Denmark, France, Ireland, Mexico, Norway, Switzerland, the United Kingdom and the United States (Banerjee et al., 2024[3]). A number of regions have already faced an increase in heavy precipitation, including North America, Northern Europe and Central and Eastern Asia (Swiss Re sigma, 2023[4]). The average annual number of very heavy precipitation days is projected to at least double in 28 of 46 OECD Member and accession candidate countries3 by 2080-2099, relative to 2020-2039, under an intermediate emissions scenario (Shared Socio-economic Pathway 2-4.5) (OECD, 2025[5]).
Note: Flood Hazard Scores refer to “Total” hazard scores reported by Marsh McLennan and calculated as the average of the hazard scores riverine (fluvial), coastal, and rainfall (pluvial) flooding. Hazard scores were calculated based on 100-year return period flood maps under present day climate and different future climate change scenarios.
Source: OECD calculations based on Total Flood Hazard Scores provided in the Marsh McLennan Flood Risk Index (Surminski et al., 2023[6]).
The share of economic losses resulting from floods that is insured is low in many countries. Between 2000 and 2024, approximately 28-31% of reported economic losses from flood risks in OECD Member and accession candidate countries were insured (and approximately 32% in OECD Members).4 The share of flood losses that is insured is higher than in the case of earthquake losses but lower than the share of wildfire and storm losses insured. In 20 OECD Member and accession candidate countries, less than 20% of flood losses were insured. The insured share of flood losses equalled or exceeded 70% in only five OECD Members (Figure 5.3). The share of insured losses between 2020 and 2024 (35%) was higher than in 2010-2019 (29-30%) and 2000-2009 (23-27%), suggesting some progress in reducing financial protection gaps for flood risk.
Note: Calculated as sum of insured losses (2000-2024) divided by sum of economic losses (2000-2024), including only events with both insured and economic loss estimates reported.
Source: OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)
While flooding can occur almost anywhere, some communities and individual properties face very high exposure to flood risk due to their proximity to water bodies (seas or rivers) prone to overflowing.5 In countries where risk-based pricing is applied in setting premiums, some households and businesses may face unaffordable premiums due to the possibility that they will incur severe and/or frequent damage from flooding. High-risk households unable to afford coverage are at high risk of facing significant uninsured losses that are likely to be beyond their financial capacity to absorb. They could also face challenges in accessing financing as lenders increasingly take flood and other climate risks into account in lending decisions.6
Public-private insurance programmes can support the availability, affordability and take-up of insurance for flood and other natural hazard risks. Public-private insurance programmes that provide coverage for flood risks have been established, or are being established or considered, in at least 14 of 38 OECD Members.
This chapter provides an overview of the design features of these programmes and an examination of how these features impact four possible objectives for public-private insurance programme. 7,8 Section 5.2 provides an overview of the design features of flood risk insurance programmes. The following sections assess how the different design features might impact the set of possible objectives for the establishment of a programme: (i) achieving broad coverage of flood losses (Section 5.3); (ii) leveraging (re)insurance and capital market capacity (Section 5.4); (iii) limiting public sector exposure to flood risk (Section 5.5); and (iv) supporting flood risk reduction and adaptation (Section 5.6). Section 5.7 concludes.
A number of countries have established, or are establishing, public-private insurance programmes that provide compensation, insurance coverage or reinsurance for flood risks. Public private insurance programmes9 that cover some flood risk have been established in Australia, Belgium, Denmark, France, Iceland, Italy, Morocco, New Zealand, Norway, Romania, Spain, Switzerland, United Kingdom and the United States. In addition, a programme is currently under consideration in Canada10 and an existing earthquake insurance programme in Türkiye11 is being expanded to include coverage for flood risk. In some cases, these programmes provide coverage for a broad range of natural hazard risks, including flood risk. In others, the programmes are targeted specifically at flood and flood-related risks. In the case of Australia, the programme is targeted at cyclone risk and provides limited coverage for cyclone-related flooding. A description of these programmes is provided in Table 5.1.
Note: 1 The programme in Australia is focused on cyclone risk and includes some limited coverage for cyclone-related flood risk.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes, https://doi.org/10.1787/338ba23d-en; Kingdom of Belgium (2014[8]), Loi de 4 avril 2014 relative aux assurances.
The objectives for establishing public-private insurance programmes differ slightly across countries. Some have been established to either ensure the availability of coverage for residential and/or commercial properties that are highly exposed to flood and/or other natural hazard risk(s) or address a broader lack of affordable insurance coverage for flood and/or other natural hazard risk(s). Some are focused on supporting solidarity across the country in responding to flood and/or other natural hazard losses. In some countries, they have also been established as a mechanism for supporting other risk management objectives, such as incentivising effective management of flood or other natural hazard risks at national or local level.
5.2.1. Programme scope
The public-private insurance programmes that provide coverage for flood risks differ in terms of the scope of eligible perils and potential insureds.
Eligible hazards
Some programmes target multiple hazards while others are focused mainly on flood risk. The programmes established in Belgium, France, Iceland, Italy, Morocco, New Zealand, Norway, Romania, Spain and, in the future, Türkiye, provide coverage for multiple natural hazard perils. Others are more targeted towards providing coverage for flood or flood-related hazards, including the programmes in Denmark, the United Kingdom and the United States. In addition, some programmes limit the coverage provided to specific types of floods or flood damages (Table 5.2).
In Australia, the programme provides coverage for cyclone-related flooding, including storm surge, as well as wind, which means that flood damage is only covered when linked to a cyclone and when the damage or loss occurs within a “Cyclone Event Period”, defined as the period from when the cyclone begins until 48 hours after the cyclone ends.12
In Denmark, the compensation for inland flooding is limited to flood damages caused by an overflow from a waterway or lake and only where the water level in that waterway or lake has reached a level that occurs no more frequently than 1-in-20 years, as assessed by the Agency for Green Transition and Aquatic Environment and decided by the Danish Natural Hazards Council (Danish Natural Hazards Council, n.d.[9]). The same conditions apply to the compensation of damages storm surge, although with the assessment undertaken by the Danish Coastal Authority.
In Iceland, the programme does not provide coverage for damage resulting directly from pluvial/rainfall flooding.
In Italy, the obligation to acquire insurance coverage, and the accompanying co-insurance/pooling arrangement and state-backed reinsurance coverage, only applies to overflow from a waterway or artificial drainage network, including overflow caused by precipitation (ANIA, 2025[10]).
In New Zealand, the programme coverage for flood and storm damages is limited to damages to residential land (not buildings), within 8 metres of the home and outbuildings or 60 metres of the primary accessway, along with any bridge or culvert.
In Norway, the programme does not provide coverage for damage resulting directly from precipitation13 and only covers coastal flooding in the context of storm conditions and if water levels exceed the water level for a 1-in-5 year return period (Norsk Naturskadepool, n.d.[11]; n.d.[12]).
In Spain, the programme covers riverine, pluvial and coastal flood events with a natural origin, which excludes, for example, flood losses related to the breach of a dam if that breach was not the result of a natural hazard.
In Switzerland, the Public Insurance Companies for Real Estate do not provide coverage for flooding originating from an artificial body of water, such as from the failure of a dam.
Note: Darker blue indicates that the programme provides broad coverage for the given type of flooding. Lighter blue indicates that the programme provides some coverage for the given type of flooding. For example, there are exclusions or conditions related to coverage provided for all types of flood hazards in Australia, flooding and storm surge in Denmark, and storm surge and pluvial flooding in Norway. White indicates that the programme does not provide coverage for the given type of flooding.
Source: OECD survey on the design and operation of flood risk insurance programmes; Danish Natural Hazards Council (n.d.[13]), How to receive compensation after a storm surge; Danish Natural Hazards Council (n.d.[9]), How to receive compensation from the flooding scheme; Norsk Naturskadepool (n.d.[11]), Flom; Norsk Naturskadepool (n.d.[12]), Stormflo; Kingdom of Belgium (2014[8]), Loi de 4 avril 2014 relative aux assurances; World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table; Tayel (2024[15]), Mandatory catastrophe insurance: Insurers’ duty to contract; ANIA (2025[10]), Guida Cat Nat: Obbligo di assicurazione contro le Catastrofi Naturali per le imprese.
Eligible insureds
Programmes also differ in terms of the type of potential insureds that are eligible for programme coverage (Table 5.3).
In Canada, Romania, Türkiye14 and the United Kingdom15, only residential buildings are, or will be eligible for programme coverage, while in New Zealand only damage to residential land is included. In other countries, businesses are also eligible for programme coverage although insured limits are applied: AUD 5 million in Australia16, EUR 1.447 million in Belgium (Bureau de Tarification catastrophes naturelles, n.d.[16]) and USD 500 000 in the United States (FEMA, 2021[17]). These limits limit eligibility to small or medium-sized businesses. In Morocco, the co-insurance/pooling arrangement covers households and businesses although the compensation provided is only available to uninsured households. In Italy, the obligation to acquire insurance, and the accompanying co-insurance/pooling arrangement and state-backed reinsurance, only applies to non-agricultural businesses registered in the Italian Business Register, with some conditions on minimum coverage limits.17
In Iceland and Spain, the programmes also provide coverage for state-owned buildings and infrastructure. In France and Norway, the programmes provide coverage for state-owned buildings and for infrastructure assets that are covered by property insurance.
Some programmes also apply others limits on eligibility, linked to flood risk management requirements or objectives.
In Belgium, buildings constructed more than 18 months after a zone has been defined as high risk are ineligible for programme coverage.18
In Italy, illegal structures or structures without required legal authorisations are excluded (ANIA, 2025[10]).
In the United Kingdom, homes built after 2009 are ineligible for programme coverage.
In the United States, flood insurance from the National Flood Insurance Program is only available to households and businesses located in communities that participate in the programme by agreeing to adopt and implement local floodplain management regulations (FEMA, 2022[18]) although the vast majority of the flood exposed population is located in participating communities (Kousky et al., 2018[19]).
Note: Darker blue indicates that the programme provides broad coverage for the given type of insured. Lighter blue indicates that the programme provides some coverage for the given type of insured. For example, some residential and commercial properties are not eligible for programme coverage in Belgium and the United States, and some residential properties are not eligible for programme coverage in the United Kingdom. In Australia, Belgium and the United States, limits on the sum insured would likely limit eligibility to small (and potentially medium-sized) businesses. In Australia, the programme would also provide coverage for strata properties, as long as the strata is at least 50% dedicated to residential purposes. In Türkiye, offices, commercial or (light) industrial companies that are located in a residential building are also required to acquire programme coverage. White indicates that the programme does not provide coverage for the given type of insured. The establishment and possible design features of the programme in Canada are under consideration.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; Kingdom of Belgium (2014[8]), Loi de 4 avril 2014 relative aux assurances; Bureau de Tarification catastrophes naturelles (n.d.[16]), Les biens concernés; FEMA (2021[17]), Flood Insurance and the NFIP; Tayel (2024[15]), Mandatory catastrophe insurance: Insurers’ duty to contract; ANIA (2025[10]), Guida Cat Nat: Obbligo di assicurazione contro le Catastrofi Naturali per le imprese; Department of Finance Canada (2024[20]), Budget 2024: A clean and safe environment for the next generation.
5.2.2. Type of coverage provided and role in the market
The coverage for flood risk offered by programmes differs between countries along with the role of the programme in the market.
In Iceland, New Zealand, Spain, Türkiye and the United States, the programmes provide direct/primary insurance coverage for flood risk through a state-owned insurance company or provider. In Switzerland, a number of state-owned insurance companies are the sole providers of property, including flood, insurance coverage in the cantons where they operate. In Denmark, compensation is provided by a public council mandated to collect a tax on each insurance policy and use those funds to compensate flood and storm surge losses, subject to the conditions noted above. In Romania, the programme provides direct flood insurance coverage and is owned collectively by private insurance companies.
In Belgium, Italy, Morocco, Norway and Switzerland, private insurers operate a co-insurance/pooling arrangement that may share some or all of the claims across participating insurance companies and/or collectively acquire reinsurance. For example, in Italy, the main function of the arrangement, in which participation is voluntary, is to acquire reinsurance on behalf of the member companies (ANIA, 2025[21]). In Switzerland, there is also a co-insurance/pooling arrangement among the Public Insurance Companies for Real Estate.19 A co-insurance/pooling arrangement among insurers can be similar to a reinsurance arrangement, as the co-insurance/pooling arrangement acts like a reinsurer for the direct insurers.
In Australia, France, Italy and the United Kingdom, the programmes offer a reinsurance coverage for flood risk, or cyclone-related flood risk in the case of Australia, which is also the approach under consideration in Canada.
Note: Blue indicates that the programme provides the given type of coverage. White indicates that the programme does not provide the given type of coverage. 1 The establishment and possible design features of the programme in Canada are under consideration. 2 In Italy, the programme legislation allows for the creation of a co-insurance/pooling arrangement by private insurers although it is not a mandated component of the programme and the participation of private insurers is voluntary.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; Kingdom of Belgium (2014[8]), Loi du 4 avril 2014 relative aux assurances; Bureau de Tarification catastrophes naturelles (n.d.[16]), Les biens concernés; Tayel (2024[15]), Mandatory catastrophe insurance: Insurers’ duty to contract; ANIA (2025[10]), Guida Cat Nat: Obbligo di assicurazione contro le Catastrofi Naturali per le imprese; Department of Finance Canada (2024[20]), Budget 2024: A clean and safe environment for the next generation.
The different programmes play different roles relative to the private insurance or reinsurance market. The public insurance companies in Iceland and Switzerland (in cantons where Public Insurance Companies for Real Estate have been established) are the only providers of insurance coverage for flood risk for households and businesses. The public insurance company in Spain is also the only provider of insurance coverage for flood risk although private insurers could choose to offer coverage for this risk to their policyholders. However, as outlined below, they may transfer risk to private reinsurance markets. In Romania and Türkiye, the programmes are the main source of flood insurance coverage for households although private insurers provide supplemental coverage for households and all coverage for businesses. In New Zealand, the programme only covers flood damage to residential land so all flood insurance coverage for residential buildings and businesses is provided by private insurers. In the United States, private insurers provide flood coverage for larger businesses and offer alternative (and supplemental) coverage for households and smaller businesses.
The co-insurance/pooling arrangements established in Morocco, Norway and among private insurance companies in Switzerland assume all flood risk provided by participating private insurers.20 In Belgium, the co-insurance/pooling arrangement only applies in the case of high-risk households and businesses and compensation is provided only when overall losses exceed a specific threshold, which suggests that private insurers and reinsurers provide most of the coverage for flood risk in Belgium. In Switzerland, the co-insurance/pooling arrangement among Public Insurance Companies for Real Estate involves risk sharing among members if annual losses exceed a specific threshold. In Italy, the co-insurance/pooling arrangement is voluntary21 and there is, thus far, no requirement on members to cede a minimum amount of risk to the pool (ANIA, 2025[21]).
The programme that provides reinsurance in the United Kingdom is designed to target high-risk households which means that private insurers and reinsurers should assume some or most of the flood risk related to lower-risk households. 22 In Australia, insurers that do not provide significant coverage for cyclone risk in higher risk areas are not required to transfer their cyclone and cyclone-related flood risk to the reinsurance programme.23 In France, the programme offers a quota-share reinsurance coverage for 50% of the assumed risk from floods and other natural hazards as well as an unlimited stop-loss coverage, although there is no requirement for insurers to cede risk to the programme. This means that insurers can retain their flood risk or cede some flood risk to private reinsurance markets. The public reinsurance coverage available in Italy similarly limits the amount of risk that can be transferred to 50% (Tayel, 2024[15]) and there is also an overall limit based on the public reinsurer’s financial capacity.24
5.2.3. Approach to premium pricing
The programmes providing coverage for flood risk use two main types of approaches to setting premiums for the coverage that they provide.
In Belgium, Iceland, Morocco, New Zealand, Norway, Spain and Switzerland (with some exceptions25), premiums for programme coverage of eligible properties are established as a fixed share of the sum insured, although the rate is higher for commercial properties in Spain and lower for infrastructure in Iceland. In France, an additional premium of 20% of the base premium is collected for property risks and 9% for motor vehicle risk for coverage of the natural hazard risks included in the programme. In Romania, the premium, and the amount of coverage provided, is based on the type of construction. More resilient homes receive higher amounts of coverage and pay higher premiums (World Forum of Catastrophe Programmes, n.d.[14]).26 In the United Kingdom, the premium for reinsurance coverage offered by Flood Re is established based on the relevant Council Tax band where the home is located, which means that higher value properties pay higher premiums.
Only the insurance coverage provided by programmes in Türkiye and the United States, and the reinsurance coverage provided by the programmes in Australia and Italy apply risk-based premiums. In Australia, a complex rating algorithm is used with separate rating tables for wind, storm surge and flood that reflect risk, location, building characteristics and risk mitigation undertaken by policyholders. In Türkiye, premium rates for flood coverage will be based on five risk categories applied at the district level (Bahar, 2024[22]) that were derived based on a model that integrates flood maps provided by other government agencies, synthetic loss amounts and a building inventory developed by the programme. In the United States, the National Flood Insurance Program began implementing “Risk Rating 2.0” in October 2021 which sets premiums based on flood frequency for multiple types of flooding, distance to water source and property characteristics such as elevation and rebuilding cost (subject to some limitations, as discussed below) (FEMA, 2023[23]).
Note: Darker blue indicates the programme’s approach to setting premiums, either fixed rate or risk based. Lighter blue indicates that programme premiums are partially risk based. For example, programme coverage in Romania takes into account the type of construction of the home and some Public Insurance Companies for Real Estate in Switzerland apply differentiated premium pricing.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; Bureau de Tarification catastrophes naturelles (n.d.[16]), Les biens concernés; World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table; ACAPS (n.d.[24]), La couverture contre les conséquences d’événements catastrophiques: Système assurantiel; FEMA (2023[23]), NFIP’s Pricing Approach.
However, as discussed below, private insurance companies might still incorporate a risk-based approach to premium pricing even where the approach to pricing programme coverage is based on fixed rates. For example, while the reinsurance programme in the United Kingdom applies fixed rates for the reinsurance coverage it provides, private direct insurers remain responsible for establishing the premiums that they charge to their policyholders, even if the risk is then ceded to the programme. In France, since the fixed rate is applied to the premium base set by private direct insurers, private insurers could incorporate risk-based pricing into setting the premium base.
5.2.4. Governance arrangements
Countries have established different governance arrangements in implementing the programmes that provide coverage for flood risk. The programmes have taken different approaches in terms of the applicability of insurance regulatory and supervisory requirements and the role of the government, executive or legislative, in decisions on the scope of programme coverage, approach to premium-setting and programme risk retention.
The programmes that have been established by the private insurance sector in Romania and the United Kingdom and the programme operated by a private insurance company in Türkiye are subject to the same regulatory and supervisory requirements applied to private insurance or reinsurance companies. This includes both prudential and market conduct regulation and supervision in the case of Romania and the United Kingdom27 and prudential supervision in Türkiye. The public (re)insurers in Iceland and Spain28 are also subject to the same requirements as private (re)insurers and are supervised by the insurance supervisor. The co-insurance/pooling arrangements in Italy29, Morocco30 and among private insurers in Switzerland do not appear to be specifically subject to insurance supervision, although the insurers that participate in those arrangements would be subject to insurance regulatory and supervisory requirements. The programmes in Australia and New Zealand are operated by “Crown” or government entities that are overseen by a board that is accountable to a Minister, while the Public Insurance Companies for Real Estate in Switzerland are subject to requirements established in cantonal law.
For most of the programmes, including those in Australia, France, Italy, Morocco, New Zealand, Romania, Switzerland (public and private insurers) and the United Kingdom, the scope of eligible hazards and policyholders covered by the programme are defined in legislation. In Spain, the scope of eligible hazards and policyholders covered is defined in regulation and there is a board of directors with equal representation from the public and private sectors that makes recommendations on design elements to the government (Ministerio de Economía, Comercio y Empresa) for decision. In Türkiye, the programme is responsible for establishing the scope of coverage, as well as the programme’s approach to premium pricing and risk retention.
The approach to premium pricing is defined in legislation in Romania and in Switzerland (for private insurers) and subject to a government or ministerial decision in most other countries, with the exception of Australia and Türkiye, where decisions on premium pricing are made by the programme. Most programmes are responsible for decisions on risk retention and the use of reinsurance or retrocession to transfer programme risk, with the exception of Australia and the United Kingdom,31 where these decisions are made by the government or responsible minister.
Note: Dark blue indicates that the authority for making decisions on the given programme design element rests with the legislature. Medium blue indicates that the authority for making decisions on the given programme design element rests with the government or responsible minister. Light blue indicates that the authority for making decisions on the given programme design element rests with the programme management or board.
Source: OECD survey on the design and operation of flood risk insurance programmes; Tayel (2025[25]), Policies covering catastrophes: new obligations for Italy-based companies and insurers.
Achieving broad coverage of flood-related losses should be one of the primary objectives in establishing a flood risk insurance programme. Achieving broad coverage requires that coverage is widely available, affordable and acquired. The approaches taken to supporting availability, affordability and take-up differ across the established programmes, based on factors such as the level of exposure to extreme losses, the capacity of private insurance markets, as well as policy objectives related to solidarity and protection of the most vulnerable.
5.3.1. Ensuring the availability of coverage for flood risk
Programmes that provide comprehensive coverage for a broad set of flood hazards to both households and businesses should be able to ensure that flood insurance is broadly available for all types of potential policyholders. The programmes in Spain and Switzerland provide comprehensive insurance coverage for all households and businesses against most, if not all, relevant flood hazards. Residential and commercial flood insurance appears to be widely available in both countries32 (EIOPA, 2025[26]; Insurance Europe, n.d.[27])
Some programmes apply limits to the types of insureds or flood hazards eligible for programme coverage or the amount of programme coverage available, which could result in gaps in the availability of coverage.
Some potentially significant flood hazards are excluded from programme coverage in Australia (losses unrelated to cyclones),33 Denmark, Iceland and Norway (pluvial flooding) and Italy (coastal and pluvial flooding). In Denmark and Norway, programme support or coverage is not available for more frequent inland flooding (Denmark) and more frequent coastal flooding (Denmark and Norway). Despite these limitations, residential and commercial flood insurance appears to be widely available in Australia, Iceland and Norway, although coverage availability has been more limited for some types of flood hazards in Italy (Chow et al., 2023[28]; EIOPA, 2025[26]; Lilly, 2024[29]).34 Flood insurance is also reported to be widely available in Denmark (EIOPA, 2025[26]), although this likely refers to the coverage for pluvial flooding coverage available from private insurers.35
Larger businesses are not eligible for programme coverage in Australia,36 Belgium and the United States, and all businesses are ineligible for coverage in New Zealand, Romania, Türkiye, the United Kingdom and the programme under consideration in Canada. Flood insurance is generally available for commercial properties in Australia, Belgium, and the United Kingdom37 (BMG, 2022[30]; Browning, 2023[31]; Chow et al., 2023[28]; EIOPA, 2025[26]). In Romania, the availability of commercial flood insurance is more limited (EIOPA, 2025[26]).38
Households are not included within the scope of the mandatory insurance requirement for natural hazard risks in Italy and are therefore not eligible for the programme coverage. Building damage is excluded from programme coverage in New Zealand. Flood insurance is generally available for residential buildings in New Zealand although more limited in Italy (Finity Consulting, 2023[32]; EIOPA, 2025[26]).39
Some communities are not eligible for programme coverage in Belgium and the United States. Flood insurance is generally available for residential properties in Belgium.40 In the United States, the communities that participate in the National Flood Insurance Program reportedly account for the vast majority of the population exposed to flood risk (Kousky et al., 2018[19]), which suggests that flood insurance is generally available through the programme to most households and businesses exposed to flood risk.
The amount of programme coverage available to individual insureds is limited in Morocco, Romania and the United States and is expected to be limited in Türkiye.41 The applied limits might not provide full coverage for a total loss in some cases. Figure 5.4 compares insured limits with average home values, although home prices may not provide a good proxy for the reconstruction costs for which insurers will be responsible. Where supplementary coverage would be necessary to provide sufficient financial protection against flood damages and losses, limited availability of supplemental coverage could be considered a gap in flood insurance availability.42
Note: Calculated as the programme coverage limit as a share of the median price for a 2 bedroom home, based on the average of reported median prices for all cities included in Global Property Guide (2025[33]), Average Property Prices by Country/City. The coverage limits are MAD 2 000 000 in Morocco, RON 100 000 in Romania (Type A building), TRY 1 272 000 in Türkiye (the limit applicable to earthquake insurance coverage) and USD 250 000 in the United States. Exchange rates for 3 October 2025 were used to calculate the ratio.
Source: OECD calculations based on housing price data from Global Property Guide (2025[33]), Average Property Prices by Country/City; and insurance coverage limits from ACAPS (n.d.[24]), La couverture contre les conséquences d’événements catastrophiques: Système assurantiel; PAID Romania (2021[34]), What is PAD?; DASK (2024[35]), Guarantees and Coverage; and FEMA (2021[17]), Flood Insurance and the NFIP.
The type of programme coverage provided could also have implications for flood insurance availability. The programmes that provide reinsurance in Australia and the United Kingdom may not be able to ensure the availability of direct insurance for eligible policyholders as direct insurers will be responsible for offering insurance (or not) to those policyholders. If the programme limits the amount of reinsurance coverage provided to insurers, insurers may be unwilling to offer direct insurance if they are unwilling or unable to retain the risk that cannot be transferred to the programme (or cede that risk to another reinsurer). In France, a stop-loss reinsurance coverage is provided and coverage for flood and other natural hazard risks is a compulsory inclusion in commercial and residential property insurance policies which eliminates the risk that insurers will choose not to offer coverage for flood risk.43 In Italy, insurers are required to offer coverage for certain hazards, including flood, to businesses covered by the mandatory purchase requirement (Tayel, 2024[15]), subject to some exemptions that can help ensure that insurance companies have sufficient capacity.44 In Australia and the United Kingdom, the reinsurance provided by the programme will cover all losses, net of applicable policyholder and/or insurer deductibles,45 which means that insurers’ maximum liability for a given policy is limited and known in advance.
Residential and commercial flood insurance is generally available in Australia, France, Italy and the United Kingdom46 (BMG, 2022[36]; Chow et al., 2023[28]; EIOPA, 2025[26]; Lilly, 2024[29]). An early examination of the impact of the Cyclone Reinsurance Pool in Australia estimated that the establishment of the programme has led to an 11% increase in the probability of insurance coverage being offered in high-risk areas (Solomon, 2024[37]). However, the Australian Competition and Consumer Commission (ACCC), which has been mandated to monitor the impact of the Cyclone Reinsurance Pool on the premiums charged by private insurers, found that the Pool has had limited impact on the availability of coverage in high-risk areas in its most recent monitoring report (ACCC, 2025[38]).47
5.3.2. Supporting the affordability of flood risk insurance coverage
The establishment of a flood risk insurance programme that creates a large pool of mostly independent and uncorrelated risks should support the affordability of flood insurance coverage. Building a diversified portfolio of risk within a programme should lower the aggregate cost of coverage, reduce economic and regulatory capital needs, where applied, and lower reinsurance costs48 (other things equal). In addition, a flood risk insurance programme can limit the magnitude of losses that insurers or reinsurers might face by providing coverage for high severity or high frequency events and/or for high-risk policyholders, and therefore lower the premiums that insurers and reinsurers would need to collect to cover their exposure (OECD, 2021[7]).
Flood risk insurance programmes might also benefit from tax exemptions, either corporate taxes or premium taxes, and may be operated on a not-for-profit basis, both of which would be expected to lead to lower premium costs and improved affordability. For example, the Public Insurance Companies for Real Estate in Switzerland have been established as non-profit organisations with any excess profits returned to their customers.
In addition, programmes that benefit from a government backstop could theoretically target a lower level of underwriting profitability. A programme could operate with a higher claims or combined ratio than a private insurer or reinsurer that would be subject to market, and potentially supervisory,49 requirements or pressures to maintain a margin of safety. In doing so, the programme would have the ability to charge lower premiums than a private insurer or reinsurer, and therefore support affordability. However, as discussed below, operating with lower levels of underwriting profitability could create potential risks for public finances and it does not appear that many, if any, of the programmes are operating at a lower level of financial soundness than (re)insurers in the private sector (see the section below on Programme financial soundness).
Programmes can also incorporate cross-subsidies in order to mitigate the risk that premiums become unaffordable for those at higher risk of flooding. Programmes that provide coverage for multiple natural hazards can also provide cross-subsidies between the different hazards covered. The direct insurance programmes and co-insurance/pooling arrangements that apply fixed pricing in Iceland, Morocco, Norway, Spain and Switzerland are likely providing some cross-subsidies to high-risk policyholders,50 although all of these programmes also provide coverage for multiple natural hazards. These cross-subsidies are being applied directly into the premium rates that low- and high-risk policyholders pay for coverage and are broadly applied given the broad scope of these programmes.51 As a result, programmes in these countries, through low-risk policyholders, are supporting the affordability of coverage for high-risk policyholders and would likely mitigate most if not all affordability challenges. For example, in Spain, EIOPA estimates that between 0-25% of households and businesses could find flood insurance unaffordable (EIOPA, 2025[26]).
The reinsurance programmes in Australia, France and the United Kingdom integrate cross-subsidies into the reinsurance coverage that they provide. In the United Kingdom, reinsurance premiums are established at a fixed rate applied to the value of the property, based on the applicable Council Tax band, and a levy is charged on all property insurance policies to subsidise the cost of the reinsurance provided for high-risk properties. In Australia, the reinsurance programme applies risk-based pricing although a cross-subsidy is incorporated by transferring the profit margins earned on the reinsurance coverage provided to low-risk policyholders to subsidise the reinsurance coverage provided to high-risk policyholders. In France, the cost of programme reinsurance coverage is priced as a fixed share of the premium base, without regard to the level of risk.
However, direct insurers in Australia, France and the United Kingdom may still apply risk-based pricing, including for policies ceded to the programme, although they may be encouraged to transmit the cross-subsidies provided in programme reinsurance coverage. In the United Kingdom, the subsidised reinsurance for high-risk properties provided by Flood Re likely acts as a constraint on premium rates for high-risk properties as Flood Re assumes almost all of the risk from the direct insurer, with the exception of a GBP 250 deductible. The establishment of Flood Re appears to have had an impact on affordability in the United Kingdom. One study estimated that the average difference in cost for household property insurance, inclusive of flood coverage, for those at high-risk of flooding was significantly lower in 2022 relative to 2018 (10% in 2022 relative to 34% in 2018) (BMG, 2022[36]). However, according to Flood Re, the difference may currently be higher for homes at high-risk of flooding.52
In Australia, the design of the programme should also support the transmission of the cross-subsidies incorporated into its reinsurance pricing into the pricing imposed by private insurers as the programme assumes all of the risk from direct insurers, without a retention or deductible. As a result, insurers would have little incentive to charge higher risk-based premiums than they will be charged by the programme for reinsurance coverage, as they are not retaining any of that risk. In addition, insurers are required to pass on the premiums savings achieved through the establishment of the reinsurance programme and this is monitored by ACCC. The most recent ACCC monitoring report found that the Cyclone Reinsurance Pool has supported more affordable premiums for households and small businesses in areas facing medium and high levels of cyclone risk, relative to rates before the pool was operational (ACCC, 2025[38]).53
In France, the premium applied by direct insurers for the coverage for natural hazard risks included in the programme is fixed as a share of the base premium, although direct insurers could charge high-risk policyholders a higher base premium to account for more significant exposure to natural hazards. Insurers might have some incentive to incorporate higher risk into their pricing as the programme will only assume up to 50% of the risk. However, the stop-loss protection included in the programme’s reinsurance coverage should reduce the incentive to charge higher premiums. There is some evidence that some insurers in France have increased premiums in highly-exposed areas in response to increasing natural hazard losses (AM Best, 2025[39]).
In Italy, there are no requirements applicable to the premium rates that insurance companies charge although the establishment of the co-insurance/pooling arrangement and the availability of public reinsurance should support affordability. In addition, the insurance supervisor (IVASS) is required to establish a portal that will allow businesses to compare offers from multiple insurers and is regularly monitoring insurance coverage pricing.54 Insurance companies are also required to recognise risk reduction measures implemented by policyholders when establishing premiums (Tayel, 2025[25]), which can also support affordability.
Affordability challenges may emerge where direct insurance programmes (i.e. programmes that operate as direct insurers) apply risk-based pricing to the direct insurance coverage that they provide. The direct insurance programme in the United States applies, and the expanded direct insurance programme in Türkiye will apply, risk-based pricing. As a result, higher-risk policyholders could face high premiums for programme coverage that may be, or may become, unaffordable. In the United States, the National Flood Insurance Program is implementing a transition towards risk-based premiums over a number of years and premium increases are limited to 18% per year. As a result, those at highest risk of flood may continue to benefit from subsidised premiums for some time (GAO, 2023[40]).55 The programme in Türkiye may include premium subsidies to mitigate some of the affordability challenges that could accompany risk-based pricing. However, at the time of writing, a decision on possible premium subsidies had not been taken.
Affordability challenges in flood insurance might also exist or emerge where coverage for some types of flood risks or some types of policyholders are excluded from the scope of the programme, such as coverage for non-cyclone flooding in Australia, pluvial flooding in Denmark and Iceland, coastal and pluvial flooding in Italy, as well as coverage for all or larger businesses in Australia, Romania and the United Kingdom, coverage for households in Italy, and coverage for building damage in New Zealand. There appears to be some affordability challenges in Australia and the United Kingdom (Table 5.7). In Denmark, for pluvial flooding, and New Zealand,56 affordability challenges appear limited as private insurers may not have fully applied risk-based pricing for flood insurance coverage (Seifert-Dähnn, 2018[41]; Lilly, 2024[29]).
Affordability challenges are more significant in Romania. The share of businesses that are estimated to face flood insurance affordability challenges is relatively high. The share of households is also estimated to be moderately high. The programme in Romania has likely contributed to reducing affordability challenges for households by offering low-cost basic coverage. However, some households may still face affordability challenges due to the cost of the voluntary supplemental insurance that is offered by private insurers.
Note: Dark blue indicates that there are significant challenges related to the affordability of flood insurance coverage. Medium blue indicates that there are some important challenges related to the affordability of flood insurance coverage. Light blue indicates that there are some minor challenges related to the affordability of flood insurance coverage.
Source: The data for Australia is from Paddam, Liu and Philip (2024[42]), Home Insurance Affordability Update; and ICA (2025[43]), Insurance Catastrophe Resilience Report 2024–25. The data for Romania is from EIOPA (2025[26]), Dashboard on insurance protection gap for natural catastrophes. The data for New Zealand is from Lilly (2024[29]), Insurance availability and risk-based pricing; and Finity Consulting (2023[32]), Insurance Price Monitoring. The data for the United Kingdom is from BMG (2022[36]), Availability and affordability of flood insurance: Integrated household report; BMG (2022[30]), Availability and affordability of flood insurance: Small and medium-sized enterprises (including agricultural businesses); and correspondence with Flood Re. The data for the United States is from GAO (2023[40]), Flood Insurance: FEMA's New Rate-Setting Methodology Improves Actuarial Soundness but Highlights Need for Broader Program Reform; and Mindock (2024[44]), US judge refuses to block new FEMA flood insurance rate overhaul.
5.3.3. Supporting take-up of flood insurance coverage
Efforts to ensure availability and support affordability may not be sufficient to ensure take-up, and ultimately broad coverage, if households and/or businesses have a limited willingness-to-pay for flood insurance coverage. There are a number of reasons why households and/or businesses might have a limited willingness-to-pay for flood insurance coverage (OECD, 2016[1]; 2021[7]), including: (i) underestimation of their exposure to flood risk, which may be particularly relevant for those whose property is located at higher altitudes or at a significant distance from bodies of water or where their property is somewhat protected by flood barriers or other protective infrastructure; (ii) misunderstandings about whether their existing coverage responds to flood damages and losses, such as if they do not realise that their property insurance coverage does not include flood coverage; (iii) expectations that potentially substantial government financial assistance or compensation will be provided to those impacted by floods; and/or (iv) unaffordability in the context of other pressing financial needs.
In some countries with flood risk insurance programmes, insurance sector practices and/or legislative or regulatory requirements have been implemented that support the purchase of insurance coverage for flood risk (Table 5.8).
In some countries, some households and/or businesses are required to acquire insurance coverage for flood risk (i.e. mandatory purchase),57 including residential tenants and co-owners of multi-dwelling properties in France, households in Romania, households and some businesses located within municipal boundaries in Türkiye, businesses in Italy58 and all households and businesses in Iceland and many parts of Switzerland.59 In France, Iceland and the applicable Swiss cantons, the requirement applies to property insurance coverage that includes coverage for flood risk. In Italy, the obligation is to acquire insurance coverage against flood as well as earthquakes and landslides. In Romania and Türkiye, the requirement applies specifically to the coverage offered by the programme.
In other countries, the property insurance that is offered to households and businesses by direct insurers includes coverage for flood risk by default (i.e. automatic inclusion) – which may be the result of a regulatory or supervisory requirement or expectation, or simply the market practice in that country. Property insurance in Belgium, France, Morocco, Norway, Spain, all Swiss cantons and the United Kingdom automatically includes coverage for flood risk. In Denmark, insurers must pay a tax on each property and contents insurance policy which provides funding for the compensation programme available to all policyholders, which is similar to an automatic inclusion of the coverage provided by the compensation programme. In New Zealand, the programme coverage for flood damage to land is automatically included in residential property insurance and most residential and commercial policies include the private sector coverage for flood damage to buildings.
In Türkiye, the United Kingdom and the United States, some or all households and/or businesses with a mortgage are required to acquire insurance that covers flood risk.60 In Türkiye, the requirement applies to households with a bank loan that are subject to the mandatory purchase requirement described above. In the United Kingdom, the requirement to acquire flood coverage is applied as a result of lender practice. In the United States, it is a legislative requirement applicable to lenders that provide federally-backed mortgages that households and businesses located in Special Flood Hazard Areas61 obtain flood insurance (FEMA, 2020[45]). In addition, in the US state of Florida, all households that have acquired wind coverage from the state-owned insurer (Citizens) will be required to purchase flood insurance based on legislation passed in 2022, subject to a transition period and some exceptions for those who live on upper floors of buildings (Insurance Journal, 2023[46]).
While not applied in countries with flood risk insurance programmes, some countries, or administrative jurisdictions, have incorporated a mandatory offer requirement that obliges insurers to offer coverage for a specific peril, although policyholders may decide not to acquire that coverage. For example, earthquake insurance must be offered to households in Japan and the US state of California.
Note: Dark blue indicates that the given measure to support the purchase of flood insurance is universally applicable. Medium blue indicates that the given measure to support the purchase of flood insurance is broadly applicable. Light blue indicates that the given measure to support the purchase of flood insurance is only applicable to some households or businesses. 1 There are also property insurance requirements for households with mortgages in a number of countries where flood insurance is automatically included in standard property insurance (e.g. France, Spain, Switzerland) which means that, in practice, flood insurance is also a requirement for those with mortgages. 2 In Türkiye, the mandatory purchase requirement applies to households as well as offices, commercial or (light) industrial companies located in a residential building within the boundaries of a municipality.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; and World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table.
The effectiveness of these measures in achieving broad take-up depends on a number of factors.
In the case of mandatory purchase requirements, broad take-up may only be achieved if the requirements are broadly applicable and there is a high level of compliance with the requirements. As noted above, the requirements only apply to households in Romania, to households and some specific businesses within municipal boundaries in Türkiye and only to businesses in Italy. According to Pool-ul de Asigurare Împotriva Dezastrelor Naturale (PAID - the Romanian programme), despite the applicability of the requirements to all households and the potential for fines and benefit ineligibility,62 only 21% of Romanian households have acquired the compulsory coverage. In Türkiye, approximately 56% of all households have acquired compulsory earthquake insurance, up from 54% before the devastating earthquake in February 2023 (Bahar, 2024[22]). The mandatory purchase requirement is enforced by credit institutions, for homes with mortgages, and as part of the process for subscribing to electricity and water supply services (DASK, n.d.[47]; n.d.[48]). In Italy, businesses that do not comply with the mandatory purchase requirement will be unable to benefit from various public financial support facilities, including financial assistance for post-event reconstruction (Tayel, 2025[25]).
In the case of automatic inclusion, broad take-up will only be achieved if the vast majority of households and businesses acquire the property insurance to which coverage for flood risk is automatically included. Belgium, Denmark, France, Norway and Switzerland have property insurance penetration levels above the simple OECD average (OECD, 2025[49]).63 In France, more than 95% of households reportedly have property insurance (Lavarde, 2024[50]). In Spain, just under 80% of households reportedly have property insurance coverage (UNESPA, 2025[51]). 64 The penetration of property insurance is also high in New Zealand although slightly lower in Morocco.65
In the case of mortgage-related requirements or practices, broad take-up may only be achieved if: (i) the requirements apply to all or most households and businesses with mortgages; (ii) mortgage lenders universally apply and enforce those requirements; and (iii) a large share of households and businesses have outstanding mortgages. In Türkiye and the United States, the requirement is only applied to a sub-set of households, and businesses in the case of the United States. In Türkiye, close to 95% of the population was considered to be residing in municipal areas in 2024, which provides an indication of the share of the population that might be subject to the mortgage and mandatory purchase requirements (Turkish Statistical Institute, 2025[52]). In the United States, one estimate suggests that less than 5% of single-family homes are located within a Special Flood Hazard Area and are therefore subject to the mortgage requirement (Evans et al., 2020[53]). In the United Kingdom and the United States, approximately 28.9% and 39.3% of households had a mortgage in 2022 and 2023, respectively66 (OECD, 2025[54]).
Note: The estimates of penetration of flood insurance provided by Insurance Europe may refer, in some cases, to the share of residential and commercial property insurance policies that include coverage for flood risks. The share of households or businesses that have property insurance may be less than 100%. Dark blue indicates that take-up of flood insurance coverage is relatively high. Medium blue indicates that take-up of flood insurance coverage is moderate. Light blue indicates that take-up of flood insurance coverage is relatively low.
Source: EIOPA (2025[26]), Dashboard on insurance protection gap for natural catastrophes; Insurance Europe (n.d.[27]), Sustainability Hub: National natcat solutions; BMG (2022[36]), Availability and affordability of flood insurance: Integrated household report; BMG (2022[30]), Availability and affordability of flood insurance: Small and medium-sized enterprises (including agricultural businesses); Fanning (2024[55]), Flood cover could become mandatory for some home owners — and it may lead to having no protection at all; ARPC (2025[56]), Cyclone Reinsurance Pool Statistics as at 31 December 2024; ICNZ (2022[57]), You have more insurance than you know; Simply Insurance (2023[58]), How Many Homes Have Flood Insurance In The U.S.? Plus Over 30 Flood Insurance Statistics! (May 2024); Persano Adorno (2025[59]), Legislative and financial innovation tools for reducing the insurance protection gap for natural catastrophes in Italy; UNESPA (2025[51]), Memoria social del seguro.
Applying these types of measures to support the purchase of flood insurance will likely have other implications that need to be taken into account.
It may be difficult to implement a mandatory purchase requirement without some form of subsidisation of premiums for those at highest risk, as some households and businesses may be forced to purchase coverage that they cannot afford. In Iceland and in most Swiss cantons, premiums are set based on a fixed share of the sum insured, which means that households and businesses in Iceland and Switzerland that face high levels of exposure to flood risk would not likely face premium rates that reflect that exposure. In Romania, there is some variation in premium rates although the amount of available programme coverage is limited, and premiums are low to reflect the limited amount of coverage provided.
A similar challenge would exist in countries with mortgage-related requirements. In the United Kingdom, the reinsurance coverage provided by the programme assumes all flood losses and is priced as a fixed rate based on Council Tax Band, with an explicit cross-subsidy incorporated. This should allow for affordable premiums among high-risk households with a mortgage, as competition among direct insurers would likely mean that Flood Re’s pricing is ultimately passed on to households. In the United States, the programme coverage is risk-based, or transitioning towards risk-based, which could lead to challenges for high-risk households and businesses with a mortgage loan. An ongoing legal challenge by some US states to the implementation of “Risk Rating 2.0” includes concerns about the ability of households with mortgages to meet the flood insurance requirement when premium rates are increased (McGill, 2023[60]). Draft legislation was also introduced in the United States in 2025 to provide tax credits to lower income households that acquire flood insurance, although the legislation has not been passed (S.586 - 119th Congress (2025-2026), 2025[61]).
Automatic inclusion of coverage for flood risk in property insurance policies, as well as the mandatory offer approaches applied in some countries for earthquake insurance, would force insurance companies to offer flood coverage to high-risk policyholders, particularly if it is a regulatory or supervisory requirement. In countries that do not impose any controls on premium pricing, insurance companies could simply incorporate high exposure to flood risk into the cost of premiums, which could lead to affordability challenges. However, if pricing controls are imposed, automatic inclusion of flood risk could lead insurers to limit the availability of any property insurance coverage for households or businesses facing high exposure to flood risk.67 Premiums are established as a fixed share of the sum insured in almost all of the flood risk insurance programme countries where flood risk is automatically included in property insurance, which should mitigate these potential challenges to availability and affordability. In Italy, where there is an obligation on insurers to offer coverage for flood risks or potentially face pecuniary fines, insurers may refuse to offer coverage and avoid the penalties if they have reached their pre-defined “tolerance limit” (d’Elia and Fumarola, 2025[62]).
However, requirements to purchase insurance coverage could also have implications for policyholder incentives for investing in risk reduction. If the premiums applied to required coverage do not reflect the level of risk, policyholders would likely face reduced incentives to invest in risk reduction, insofar as there is meaningful scope for them to reduce risks.
5.3.4. Levels of coverage for past flood losses
The broad availability of affordable insurance coverage that is largely acquired by households and businesses should lead to lower levels of uninsured losses. Figure 5.5 provides an estimate of the share of economic losses resulting from floods that were insured during the period 2000-2024 in countries with programmes that provide coverage for flood risk.
Note: Calculated as sum of insured losses (2000-2024) divided by sum of economic losses (2000-2024), including only events with both insured and economic loss estimates reported. The line provides the OECD (simple) average for the same period (32.3%).
Source: OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)
The share of flood losses insured in most countries with a flood risk insurance programme was higher than the OECD average for the period although some countries faced a relatively lower share of insured losses.
In Morocco, all of the flooding events that were included in the dataset occurred before the establishment of the programme (2020). In Romania, most of the losses (over 90%) occurred before the establishment of the programme in 2010.
As noted above, while flood insurance is widely available and affordable in the United States, take-up is low and mortgage-related requirements only apply to a limited share of the population. There is also some evidence that significant flooding has occurred outside of the Special Flood Hazard Areas where insurance requirements are applied. For example, a significant share of the flooding due to Hurricane Debby and Hurricane Helene in 2024 reportedly occurred outside of these flood hazard areas (Insurance Journal, 2024[63]; Kaufman and Nicoletti, 2024[64]). According to one report, more than 40% of programme claims between 2017 and 2019 were for properties outside of Special Flood Hazard Areas (The Washington Post, 2024[65]).68
In Australia, the programme became operational in 2022 and has been paying claims since the 2022/2023 cyclone season, although the requirement for insurers to join the pool was implemented in phases up until the end of 2024. Therefore, the vast majority of the losses included in the dataset occurred before the programme was established. In addition, the overall share of losses insured was driven by the cyclone-related Queensland flooding in 2010-2011 which involved many disputes related to insurance coverage (OECD, 2016[1]). The share of insured losses was 55% if flooding losses in 2010-2011 are excluded.
In Spain, coverage for flood risk is included with standard residential and commercial property insurance, although the share of households covered by property insurance is slightly lower in Spain than some other OECD Members.69
The programme in the United Kingdom was not operational until 2016. The share of flood losses insured in the United Kingdom has increased since 2016 (77% in 2016-2024 compared to 71% in 2000-2015).
The programmes that operate in countries that have achieved higher levels of coverage of flood risk, including Belgium, Denmark, France, Norway, Switzerland, Spain and the United Kingdom, have a number of common characteristics.
Most of the programmes provide broad coverage, either in terms of: (i) eligibility for programme coverage, as the programmes in Belgium, France, Norway, Spain and Switzerland provide coverage to households and most or all businesses; (ii) covered hazards, as the programmes in Belgium, France, Norway, Spain and Switzerland provide coverage for most types of flood risk as well as for other natural hazards; and/or (iii) comprehensive coverage, as the programmes operating in all of these countries provide comprehensive coverage for flood risk and do not apply limits on the sum insured that are significantly below the value of the property.
Most of the programmes have specific measures to support affordability: some form of cross-subsidies are applied in France, Norway, Spain, Switzerland and the United Kingdom and a ceiling on premium rates is applied directly in Belgium and indirectly in the United Kingdom through competitive pressures.70
Insurance coverage in all of these countries automatically includes coverage for flood risk, either as an industry practice or legal/regulatory requirement (e.g. France, Spain, Switzerland, United Kingdom).
The design of flood risk insurance programmes should aim to leverage insurance market expertise, distribution networks and available risk bearing capacity, while serving to mitigate any contingent public sector liabilities arising from any backstop to the programme (see the section below on Minimising impacts on public finances). Different approaches to the design of flood risk insurance programmes have different implications for the participation of private insurance and capital markets in risk assessment, policy distribution and loss absorption.
In almost all of the countries with flood risk insurance programmes, flood insurance coverage is distributed through, and often provided by, the private insurance sector. The only exceptions are the Swiss cantons where Public Insurance Companies for Real Estate are the sole providers of property insurance, including flood insurance. The direct insurance or compensation programmes in Denmark, Iceland, New Zealand and Spain collect a surcharge, levy or premium from private insurers that distribute policies to which the programme coverage or compensation is attached. The direct insurance programmes in Romania, Türkiye and the United States offer their coverage as a separate policy available through participating private insurers. In countries where programmes operate as co-insurance/pooling arrangements or provide reinsurance coverage, policy distribution would also, by definition, be undertaken by private insurers who distribute and underwrite the policy and transfer some or all of the risk to the co-insurance/pooling arrangement or reinsurer.
Most of the flood risk insurance programmes that provide direct insurance coverage share risk with the private sector in different ways. Some limit the scope of insureds eligible for coverage or provide limited amounts of coverage, and leave it to the private insurance sector to provide flood insurance coverage for those that are not eligible for programme coverage or for losses above the programme limits. For example, private insurers provide all or most flood insurance coverage for businesses in New Zealand, Romania and Türkiye. They also provide coverage for damages or hazards outside the scope of the programme coverage, such as building damage in New Zealand, and supplementary insurance coverage for amounts greater than the basic coverage provided by the programme in Romania, Türkiye and the United States. The compensation programme in Denmark is limited to providing compensation for uninsurable storm surge losses and lower frequency inland flooding, and ultimately provides a level of compensation that appears small relative to losses covered by private insurers after major flood events.71 Among the direct insurance programmes, only the US National Flood Insurance Program provides coverage that is an alternative to, and competes with, coverage offered by the private insurance sector (see Box 5.1).
In the United States, private insurers offer flood insurance coverage that is an alternative to the coverage provided by the National Flood Insurance Program, as well as coverage to supplement the coverage provided by the programme which applies limits on the sum insured. The number of private insurers offering flood insurance in the United Sates increased from 16 to 79 insurers between 2016 and 2023 while premiums collected grew from USD 410 million to USD 1.45 billion (III, 2024[66]). According to estimates by the Insurance Information Institute and AM Best, private insurers account for approximately 32-40% of total flood insurance premiums (III, 2024[66]; Kiriluk-Hill, 2025[67]). The private insurance market share of residential flood insurance premiums is lower, although it may have increased significantly in recent years. One study estimated that only about 3.5% to 4.5% of residential flood insurance was provided by private insurers in 2018 (Kousky et al., 2018[19]), although a more recent examination estimated that private insurers collected approximately 20% of residential flood insurance premiums (Neptune, 2025[68]).
A number of measures have been implemented in recent years to address impediments to the growth of private insurance market coverage. For example, a non-compete clause applicable to insurers distributing National Flood Insurance Program coverage was eliminated in 2018 which allows insurers that participate in distributing programme coverage to offer their own competing coverage for flood (Grzadkowska, 2018[69]). Regulatory changes were also made to ensure that mortgage lenders consider private flood insurance coverage to be equivalent to programme coverage for the purposes of complying with the flood insurance requirements in Special Flood Hazard Areas (Kousky et al., 2018[19]). State regulators in the United States, through the National Association of Insurance Commissioners, have worked to encourage private flood insurance market growth by supporting legislative and regulatory actions at the state level and building consumer awareness of flood risk, private flood insurance options and flood risk reduction measures.
However, the National Flood Insurance Programme is offering subsidised coverage for some policyholders, either through the community-level premium discounts that are being offered to encourage local flood risk management (see the section below on Incentivising risk reduction through premiums and access conditions) or as a result of the imposed cap on annual premium increases during the transition to “Risk Rating 2.0.” In addition, as outlined below in the section on Programme financial soundness, the programme has a relatively high claims ratio and has had to borrow funds from the US Treasury to respond to losses beyond its financial capacity. This suggests that premium rates are insufficient at an aggregate level, which would make it difficult for regulated and privately-funded insurers to compete based on price. A recent analysis by the US Government Accountability Office found limited evidence that the transition to risk-based pricing has, thus far, led to significant changes in private market conditions as National Flood Insurance Program premiums are still generally lower than what the private insurers would need to collect to underwrite flood risk profitably (GAO, 2023[40]). There is also some evidence that growth in private flood insurance has recently stalled (Rabb, 2024[70]).
Private insurers may also face other obstacles to competing on a level playing field with the coverage provided by the National Flood Insurance Program.
Higher-risk policyholders that continue to benefit from reduced premiums through the transition to risk-based pricing are required to maintain continuous coverage in order to retain access to the premium discounts. Currently, only National Flood Insurance Program coverage is considered in determining continuous coverage, which means that policyholders that switch to private insurance coverage would lose access to this benefit (GAO, 2023[40]).
The intermediaries who distribute National Flood Insurance Program coverage receive a commission that some have suggested is high and likely more than those intermediaries would receive for distributing private flood insurance coverage. High commissions could create an incentive for agents to recommend programme coverage to their clients, although one study found differing views among private insurers as to whether this is a significant issue (Kousky et al., 2018[19]).
The programmes that provide direct insurance could also transfer a portion of the risk that they assume to private reinsurance or capital markets. The pooling of domestic flood risk through a programme should provide a more diversified pool of risk that could achieve lower pricing for reinsurance coverage than if insurers ceded their risk to the reinsurance market individually (i.e. the aggregate cost of reinsurance for domestic flood risk should be lower).
Most of the direct insurance programmes have transferred, often increasing, risk to reinsurance and capital markets, with the exception of the direct insurance programme in Spain (Figure 5.6).72 In New Zealand, the programme acquired NZD 10.3 billion in (multi-peril) reinsurance coverage for 2025-2026, its highest level ever, including NZD 225 million in continuing coverage through the issuance of its first catastrophe bond in 2023 (Natural Hazards Commission, 2025[71]). The direct insurance programme in Iceland also acquires multi-peril reinsurance coverage although losses from floods, which are expected to be limited, would likely be retained within the programme’s reinsurance retention (Natural Catastrophe Insurance of Iceland, 2021[72]). The direct insurance programme in Romania has acquired EUR 1.4 billion in reinsurance coverage for the earthquake, flood and landslide risks that the programme covers (PAID Romania, 2025[73]). In the United States, the National Flood Insurance Program acquired USD 757.8 million in traditional reinsurance and had additional coverage through three outstanding catastrophe bonds that provide approximately USD 2 billion in overall private reinsurance and capital market coverage (FEMA, 2025[74]). In Switzerland, the co-insurance/pooling arrangement among the Public Insurance Companies for Real Estate, which shares losses above a threshold, acquires reinsurance coverage to support the arrangement.
Note: Includes all hazards covered by the programme (i.e. not just flood risk) in Iceland, Romania and Switzerland.
Source: NTI (2019[75]; 2021[76]; 2023[77]), Ársskyrsla; NTI (2025[78]), Ársreikningur; PAID Romania (2019[79]; 2020[80]; 2021[81]; 2022[82]; 2023[83]; PAID Romania, 2024[84]), Raport privind Solvabilitatea și Situația Financiară; AECA (2023[85]), Rapport Annuel 2022: La solidarité crée la sécurité; UIR (2025[86]), Rapport financier 2024; Flood Re (2018[87]; 2019[88]; 2020[89]; 2021[90]; 2022[91]; Flood Re, 2023[92]), Annual Report and Financial Statements; Flood Re (2024[93]), Annual report and accounts 2023-2024; FEMA (2018[94]; 2019[95]; 2020[96]; 2021[97]; 2022[98]), The Watermark; NFIP (2021[99]), National Flood Insurance Program’s Reinsurance Program.
The private sector plays a substantial role in assuming risk in the programmes in Belgium, Italy, Morocco, Norway and Switzerland that operate as private sector co-insurance/pooling arrangements. These pooling arrangements share risk among direct insurers through the pool, which acts like a reinsurer for the participating insurers, and the pool transfers the risk that it has assumed to international reinsurance markets. There are no state-owned reinsurers assuming a part of the risk from the co-insurance pool, except in the case of Italy where the co-insurance/pooling arrangement is expected to transfer some risk to a state-owned reinsurer. For example, the co-insurance/pooling arrangement in Norway acquired a quota share coverage for losses up to NOK 2 billion and two layers of reinsurance coverage for losses above NOK 2 billion and NOK 6 billion, up to the regulatory ceiling of NOK 16 billion (Norsk Naturskadepool, 2025[100]).
The programmes that provide reinsurance coverage for flood risk in Australia, France, Italy and the United Kingdom, as well as the programme under consideration in Canada, rely or will rely on private direct insurers to distribute coverage. These programmes impose different levels of retention on direct insurers.
In Australia, the programme assumes all of the cyclone-related flood risk (i.e. there is no insurer deductible or retention) and is mandatory for direct insurers with more than AUD 10 million in gross written premiums for residential property insurance (ARPC, 2022[101]).73 However, as noted, only cyclone-related flood risk can be assumed by the programme which means that private insurers, and reinsurers, assume all flood risk that is unrelated to a cyclone.
In France and Italy, acquiring programme reinsurance is optional and limited to 50% of the risk. As a result, the private direct insurers must retain at least 50% of the risk or reinsure that risk in private reinsurance markets and may choose not to cede any risk to the programme. However, in France, the programme also offers an unlimited stop-loss protection74 on the 50% of the risk retained by private insurers that have agreed to cede the other 50% of the risk to the programme through the quota-share arrangement, providing additional reinsurance protection.
In the United Kingdom, acquiring reinsurance coverage from Flood Re is optional although 100% of the risk, net of a GBP 250 insurer deductible per policy, is assumed by Flood Re, meaning that there is no significant insurer retention.
As in the case of programmes that offer direct insurance, programmes that offer reinsurance can transfer risk to private retrocession markets. In the United Kingdom, Flood Re transfers a significant share of the risk it assumes to private retrocession markets. Flood Re has agreed with the government to limit its retention to GBP 250 million but accepts risk up to a liability limit of GBP 3.2 billion, with the difference retroceded to private reinsurance and capital markets (Flood Re, 2025[102]). In 2025, the programme issued its first catastrophe bond which provides GBP 140 million in protection over three years (Flood Re, 2025[103]). The Cyclone Pool in Australia does not currently retrocede risk to private retrocession markets. In France, the state-owned reinsurer has not acquired retrocession coverage under its new structure.75
All of the programmes that provide reinsurance coverage either compete with, or displace, private reinsurance markets. As noted, direct insurers in France and the United Kingdom can choose whether to retain risk, transfer risk to private reinsurers or transfer risk to the programme. The programme in France has paid, on average, 52% of overall insured losses related to natural hazards covered by the programme which suggests that insurers usually cede the maximum allowed to the public reinsurer (CCR, 2025[104]).76 As a result, the transfer of risk by direct insurers in France to private reinsurers is likely limited, unless direct insurers retain significantly less than 50% of their flood risk. In the United Kingdom, the amount of claims paid by Flood Re suggests that direct insurers continue to retain most flood risk or transfer that risk to private reinsurers.77 In Australia, on the other hand, direct insurers that provide coverage in regions at risk of cyclone-related flooding are required to transfer that risk to the programme, therefore displacing private reinsurance coverage for cyclone-related risks.78
The private sector role in distributing flood insurance coverage and assuming flood risk varies substantially across countries (Table 5.10). The potential for private sector involvement in assuming risk is generally higher in countries where: (i) flood insurance programmes operate as private sector co-insurance/pooling arrangements, including Belgium, Italy, Morocco, Norway and the Swiss cantons where private sector insurers operate; (ii) where programme coverage provides limited direct insurance coverage, such as New Zealand, Romania and the United States, although private flood insurance remains limited in Romania and the United States; (iii) where programmes provide limited or optional reinsurance coverage, such as Australia (non-cyclone flood), France, Italy and the United Kingdom; and/or (iv) where significant risk assumed by the programme is transferred to private reinsurance, retrocession or capital markets, such as in New Zealand, Romania and the United Kingdom.
Note: Dark blue represents a more substantial private sector role in the given activity. Light blue indicates some private sector role in the given activity. White indicates no private sector role in the given activity. 1 In Spain, the private insurance sector provides flood insurance and assumes flood risk under policies that are not included within the scope of the programme, such as those related to transport, construction and erection risks.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table; SVV (2022[105]), Die Elementarschadenversicherung basiert auf doppelter Solidarität .
Leveraging private insurance and reinsurance market capacity can have a number of advantages, including.
Reducing the amount of risk assumed by the public sector: as discussed in the next section on Fiscal risks related to government financial support, programmes that ultimately assume a significant share of all flood risk could face a greater risk of catastrophic losses from a major event, with potential implications for public finances where a government backstop is provided.
Limiting moral hazard: where the private insurance sector is involved in distributing or underwriting coverage, the potential for moral hazard could be reduced by ensuring that the private sector retains some of the risk.
Unlocking private sector risk assessment expertise: ensuring that the private market assumes significant levels of flood risk can potentially increase private (re)insurance sector involvement in developing analytical tools for risk assessment. Some countries where the private sector assumes significant flood risk appear to be better covered by insurance sector modelling and mapping than overall market size might otherwise warrant (and vice versa) (see Table 5.11). For example, there appears to be a greater availability of private sector modelling and mapping tools covering Belgium, New Zealand and Switzerland relative to Spain where almost all of the risk is assumed by the programme and is priced as a share of the sum insured, rather than based on risk. The development of insurance sector models and mapping tools can benefit private insurers and programmes, for example by allowing for more favourable access to reinsurance coverage,79 and can also be used to support risk reduction. However, as outlined below, many of the programmes also leverage their risk assessment expertise and their own models in support of risk reduction.
Note: Countries are ordered based on the size of the non-life insurance market (2022, USD premiums collected) from (Casanova Aizpun et al., 2023[106]). Blue shading indicates the availability of a private market catastrophe model for flood risk. White indicates that there is no available private market catastrophe model.
Source: Insurance Development Forum (2025[107]), CatRiskTools.
However, reliance on private market capacity can also have disadvantages if reductions in market appetite lead to a decrease in insurance availability or affordability, and the emergence of protection gaps. For example, reliance on reinsurance or retrocession market appetite can lead to volatility given the nature of reinsurance market cycles. A number of programmes that responded to the OECD survey on flood risk insurance programmes noted that increasing reinsurance costs have had an impact on operating performance and/or are making it difficult to maintain existing premium rates or other programme parameters. For example, increases to Flood Re’s liability limit, loss limit and industry levy were partly driven by rising reinsurance costs (Flood Re, 2024[108]).80 Reinsurance can also be a costly way to protect against claims if there are few extreme events. As can be seen in Figure 5.6 (and Figure 5.7 below), some programmes have paid significantly more in reinsurance premiums than they have received in reinsurance claims payments in recent years. However, this would be expected if the reinsurance arrangements have been calibrated to only be triggered infrequently for the most extreme events.
Programmes that are designed to play a limited role in the market, such as residual providers of coverage for risks that the private sector does not want to assume, are likely be left with a risk pool made up of high-risk properties likely to face more frequent and/or more severe flood damages, which could have implications for the financial soundness of the programme. Programmes that provide coverage for a broader set of hazards and insureds should be able to build a more diversified risk pool subject to more limited volatility in losses and potentially improved reinsurance or retrocession pricing.
Programmes that assume a large portion of the flood risk will also collect significant data for the development of maps and modelling tools that can provide an alternative to models and maps developed by the insurance sector.81 In many cases, programmes also have linkages to the government that might allow insurance-based risk analytics to make a greater contribution to risk management and risk reduction.
The establishment of a flood risk insurance programme will have implications for public finances. Flood risk insurance programmes that involve the assumption of flood risk by the public sector as a provider of insurance, reinsurance or a government backstop could create fiscal risks if the amount of premiums collected for the coverage is insufficient to pay all claims and programme operating costs. At the same time, to the extent that the programme leads to broader coverage, it could reduce the demand and need for public compensation and financial assistance. Minimising overall public sector financial exposure to flood risk should be a core objective in the design of a flood risk insurance programme.
5.5.1. Financial support provided to flood risk insurance programmes
Flood risk insurance programmes can create fiscal risks as a result of the government backstops that are provided to the programmes. Most of the flood risk insurance programmes that operate as state-owned direct insurers or reinsurers benefit from some form of explicit government backstop, with the exception of the Public Insurance Companies for Real Estate in Switzerland.
The programmes in New Zealand and Spain benefit from explicit and unlimited government guarantees (World Forum of Catastrophe Programmes, n.d.[14]). In these countries, the government will assume responsibility for any losses that are beyond the capacity of the programme to absorb. The programme in France benefits from an explicit and unlimited state guarantee that is triggered when the state-owned reinsurer’s annual aggregate claims exceed 90% of its reserves, ensuring the state-owned reinsurer’s solvency regardless of the level of claims, whether due to their severity or frequency. The state-owned reinsurer in Italy (SACE) also benefits from an explicit government guarantee although a ceiling of EUR 5 billion will be imposed on the risks it can assume under the programme, with the possibility that the ceiling may be increased in future years based on amounts paid by the state-owned reinsurer in the preceding year (Tayel, 2025[25]). The Cyclone Reinsurance Pool in Australia benefits from an explicit AUD 10 billion government guarantee to address losses beyond the programme’s financial capacity, although the government is required under legislation to adjust the limit to cover all losses if necessary.
The programme in Türkiye may be provided with an “excess-of-loss” financial protection from the government if it has not been able to secure sufficient financial protection in private reinsurance markets (DASK, 2012[109]). An excess-of-loss reinsurance coverage has been provided to the programme for its assumed earthquake risk, although decisions on government support for the flood risk coverage that the programme will provide have not yet been taken.
The National Flood Insurance Program in the United States can borrow funds from the US Treasury to fund losses to meet payment needs (OECD, 2021[7]). The programme in Iceland can borrow funds from banks with the benefit of a government credit guarantee if needed (Government of Iceland, 1992[110]).
The compensation programmes in Denmark for uninsurable losses and Morocco for uninsured losses are funded by a surcharge on insurance policies and would only create fiscal risks if demands for compensation exceed the amount collected through the surcharge and if the government decided to meet those demands. In Denmark, the compensation fund was depleted as a result of compensation demands following storm surge damages in December 2013. The Government of Denmark provided DKK 400 million to help the Council meet those demands which was repaid in 2019, funded by increases in the fee charged per policy (Stormrådet, 2020[111]). In Morocco, the compensation fund is designed to meet all compensation needs for events with a return period of up to 1-in-100 years with benefits to be reduced for more severe events (i.e. with a less frequent than 1-in-100 year return period).
The programmes that provide compensation in Belgium for excess losses and Norway for uninsurable losses are funded by budgetary resources and therefore could create fiscal risk should they be faced with significant demands for compensation. However, these programmes may not have any legal or contractual obligation to meet those demands. In the aftermath of the severe 2021 floods in Belgium, insurers reportedly agreed to increase the amount of compensation provided to impacted property owners beyond the defined insurance sector share of losses to make up for a shortfall in the compensation that the regional government would normally provide, with the expectation to be repaid by the regional government (de Thier and Heureux, 2023[112]). The per event ceiling on the amount that insurers would be obliged to pay before government compensation is provided was subsequently increased from EUR 320 million to EUR 1.6 billion (Arnoudt, 2023[113]).
The programmes that are operated by the private sector do not generally benefit from an explicit government backstop, with the exception of the direct insurance programme in Romania which can access loans from the government if necessary to meet claims payments. The co-insurance/pooling arrangements in Belgium, Italy, Morocco, Norway, the co-insurance/pooling arrangement among Swiss private insurers as well as the reinsurance programme in the United Kingdom do not benefit from any form of explicit government backstop for the coverage that they provide, although as noted, there are compensation arrangements in Belgium, Morocco and Norway to supplement the coverage provided by the co-insurance/pooling arrangements.
5.5.2. Fiscal risks related to government financial support
The extent of the fiscal risk that could result from the government backstops provided depends on: (i) the level of risk assumed by the programme, net of any risk transferred to private insurance, reinsurance or capital markets; (ii) whether the programme is collecting sufficient premiums to meet its potential claims (i.e. the programme’s financial soundness); and (iii) the nature of the government backstop provided, including whether it is limited, compensated through a premium or fee paid to government, and/or repayable.
Scope of risks assumed and retained
As noted above (see Table 5.10), some of the programmes play a more significant role in assuming flood and often other natural hazard risks and make more limited use of opportunities to transfer risk to private reinsurance or retrocession markets. Some programmes operate as the main or sole provider of flood insurance coverage, as insurers in Iceland and Spain,82 and as a reinsurer in Australia for cyclone-related flood risks. As a result, these programmes would assume a substantial amount of the country’s flood risk unless a significant proportion is transferred to private reinsurance or retrocession markets. In addition, in some countries where both programmes and private (re)insurers offer insurance or reinsurance coverage, such as France and the United States, the programmes nonetheless assume a significant share of the country’s flood risk due to limited take-up of private insurance or reinsurance and limited use of private reinsurance and/or retrocession markets.
Unlike many other lines of insurance business, coverage for natural hazard-related property damages exposes insurers and reinsurers to the risk of extreme losses due to the potential occurrence of a major event that affects many policyholders simultaneously. This risk usually drives property insurers to acquire reinsurance to protect against extreme losses (OECD, 2018[114]). An insurance or reinsurance programme that assumes a significant share of a country’s flood risk is similarly exposed to substantial losses in the event of a catastrophic flood or series of major floods in a given year. If the programme does not have significant reinsurance or retrocession protection for extreme losses or significant accumulated reserves, severe losses could necessitate financial support from governments, leaving governments with the role of reinsurer for excess programme losses. Some programmes have had to access government financial support in the aftermath of major events. The programme in France accessed the government guarantee as a result of winter storms in 1999 that caused both wind and flood damage (Cazaux, Meur-Férec and Peinturier, 2019[115]). The programme in Spain accessed a credit line from the central bank after an accumulation of severe flood damages in 1982 and 1983, although this was prior to significant changes to the legal framework of the programme (González de Frutos, 2023[116]). The US programme has borrowed significant amounts to meet flood claims in the aftermath of major hurricanes or series of hurricanes (Congressional Research Service, 2024[117]).83 The programmes in New Zealand and Türkiye have also accessed government support in the aftermath of major earthquakes.
The risk that extreme losses trigger government financial support should be reduced if the flood risk insurance programme acquires significant protection from reinsurance or retrocession markets. However, acquiring significant private market reinsurance coverage can be costly, particularly in the context of a hard reinsurance market. The cost of reinsurance coverage would need to be incorporated into the premium collected, which could have potential implications for affordability. In addition, reinsurance coverage may not be triggered over a number of years, resulting in a net cost for the programmes that ceded risk to reinsurance markets. While only reflecting a limited period of time that is insufficient to infer conclusions about the relative benefits and costs of reinsurance, most programmes have paid, sometimes significantly, more in reinsurance premiums than they have received in reinsurance recoveries in recent years (Figure 5.7). However, this would be expected if the reinsurance or retrocession coverage acquired is meant to cover extreme (i.e. very low frequency) losses. In some cases, governments that offer financial support for extreme losses may wish to evaluate the relative costs and benefits of encouraging programmes to acquire significant reinsurance protection, while taking into account the potential impact of government financial support on moral hazard.84
Note: The reinsurance result is calculated as the difference between reinsurance recoveries received by the programme and reinsurance premiums paid by the programme (shown here as a share of reinsurance premiums paid). In Iceland, Romania and Switzerland, the overall reinsurance result includes all hazards covered by the programme (i.e. not just reinsurance for flood risk).
Source: NTI (2019[75]; 2021[76]; 2023[77]), Ársskyrsla; NTI (2025[78]), Ársreikningur; PAID Romania (2019[79]; 2020[80]; 2021[81]; 2022[82]; 2023[83]; PAID Romania, 2024[84]), Raport privind Solvabilitatea și Situația Financiară; AECA (2023[85]), Rapport Annuel 2022: La solidarité crée la sécurité; UIR (2025[86]), Rapport financier 2024; Flood Re (2018[87]; 2019[88]; 2020[89]; 2021[90]; 2022[91]; Flood Re, 2023[92]), Annual Report and Financial Statements; Flood Re (2024[93]), Annual report and accounts 2023-2024; FEMA (2018[94]; 2019[95]; 2020[96]; 2021[97]; 2022[98]), The Watermark; NFIP (2021[99]), National Flood Insurance Program’s Reinsurance Program.
A reduced scope of eligible hazards and/or eligible insureds could also reduce the risk, or at least the magnitude, of extreme losses that could necessitate government financial support. Programmes could limit their overall financial exposure by, for example: (i) limiting eligibility to households and small businesses which may have more limited access to private insurance; (ii) reducing the amount of coverage provided and enabling the private sector to provide supplemental coverage; and/or (iii) limiting the scope of hazards covered by the programme to those that are uninsurable in the private market85 or those that can only be cost-efficiently addressed by investing in risk reduction.86
Governments in most countries provide financial assistance or compensation to those affected by disasters, including floods. This can be in the form of small grants to support basic needs or more substantial grants or loans to help those impacted rebuild damaged homes or businesses, or even rebuild in a more resilient way.1 Households and businesses that have comprehensive insurance coverage for damages and losses due to floods are less likely to need compensation or financial assistance to repair building damage or recuperate lost revenues, and therefore demands for public compensation and financial assistance should be lower in countries with higher levels of insurance coverage. There is some evidence that higher insurance coverage is correlated with reductions in post-event government spending. For example, an examination of government spending in the aftermath of a set of past large events estimated that an increase in insurance penetration of 1% is linked to a reduction in post-disaster government expenditure equivalent to 22% of the damages incurred (Lloyd’s, 2012[118]).
The flood insurance programmes that responded to the OECD survey provided some information on the public compensation and financial assistance that is made available in the aftermath of floods in their countries, as well as an assessment of the relative contribution of this support in responding to flood-related damages and losses. In most of the countries with flood risk insurance programmes, the contribution of public compensation and financial assistance is limited, including in countries where programme coverage is broadly available and comprehensive, such as Spain and Switzerland,2 as well as in countries where programme coverage or take-up is more limited, such as Romania and the United States, or where the programme plays a more limited role in the market, such as the United Kingdom. Only the programmes in Morocco, where a compensation programme for uninsured households has been established, and New Zealand indicated that public compensation and financial assistance played a more significant (“moderate”) role in responding to flood damages and losses.3
Providing substantial public compensation and financial assistance to households or businesses to respond to flood damages and losses could undermine efforts to encourage take-up of programme (or private sector) flood insurance coverage. Many of the countries with flood risk insurance programmes have taken steps to mitigate the risk that government compensation might discourage insurance take-up.
As noted above, the government compensation programmes in Belgium, Denmark, Morocco and Norway are specifically designed to complement the financial protection available through the flood risk insurance programme by limiting coverage to damages and losses that are uninsured in Morocco, uninsurable in Denmark and Norway, or that exceed private insurance market capacity in Belgium. Providing clear boundaries between the role of insurance, including programme coverage, and compensation programmes could help limit demands for public compensation in the aftermath of major flood events.
In Romania and the United States, the availability of public compensation and financial assistance is limited to those that have purchased or commit to purchase insurance coverage. In Romania, financial assistance from national and local governments to respond to flood damages is not available to households that do not comply with the requirement to acquire programme coverage (PAID Romania, 2021[34]). In the United States, households that receive financial assistance through the Federal Emergency Management Agency’s Individuals and Households Program are expected to maintain flood insurance to be eligible for any future payouts. In addition, households that are located in a Special Flood Hazard Area are not eligible to receive financial assistance if they have not acquired flood insurance (Bhattacharyya, Wang and Hastak, 2024[119]). In Italy, businesses that do not comply with the requirement to purchase flood and other natural hazard insurance will be ineligible for government financial assistance for recovery or reconstruction (Tayel, 2025[25]).
Notes:
1 For example, in the United Kingdom, government grants of up to GBP 5 000 have been provided to fund measures that improve a property’s flood resilience (Government of the United Kingdom, 2023[120]).
2 In its response to the OECD survey, the Swiss programme for Public Insurance Companies for Real Estate indicated that the government does not provide any public compensation or financial assistance for flood damages and losses.
3 This may reflect experience from the significant flooding that occurred as a result of Tropical Cyclone Gabrielle in 2023 where a buy-out process was offered for certain homes that were likely to be repeatedly impacted by flooding. The buy-out was funded by the central government and local council, with insurance recoveries paid to local councils, and was complemented by other relief funds made available by the central government.
However, limiting the scope of hazards covered, eligible insureds or the amount of coverage offered could ultimately reduce the overall level of coverage achieved. The risk that financial support could be triggered, or that greater amounts of support would be needed, due to a broader programme scope should be considered in the context of whether more limited coverage would lead to greater uninsured losses and public demands for more substantial public compensation or financial assistance (Box 5.2). In addition, limiting programme coverage to risks that are uninsurable could lead to more frequent or significant needs for government financial support as the programme’s portfolio of risk would be populated by higher-risk properties87 (OECD, 2021[7]).
Programme financial soundness
Fiscal risks might also arise if a programme faces more frequent underwriting losses which could occur if premiums collected are regularly insufficient to meet claims demands. A number of programmes have faced claims ratios (i.e. claims as a share of premiums) above 100%, indicating that premiums have been insufficient to cover the cost of claims (Figure 5.8).88
Note: The claims ratio for some multi-peril programmes (France, Iceland, Romania, Spain, Switzerland) is for all covered perils. The estimate for Switzerland is for the reinsurance pool established by Public Insurance Companies for Real Estate (not for the insurers). The estimate for France includes insurers and the state-owned reinsurer. The estimate for the United Kingdom includes the industry levy as premium income.
Source: The estimates for Australia, Iceland, Romania, Switzerland, the United Kingdom and United States are OECD calculations based on: ARPC (2024[121]; 2025[122]), ARPC Annual Report; NTI (2019[75]; 2021[76]; 2023[77]), Ársskyrsla; NTI (2025[78]), Ársreikningur; PAID Romania (2019[79]; 2020[80]; 2021[81]; 2022[82]; 2023[83]; PAID Romania, 2024[84]), Raport privind Solvabilitatea și Situația Financiară; AECA (2023[85]), Rapport Annuel 2022: La solidarité crée la sécurité; UIR (2025[86]), Rapport financier 2024; Flood Re (2018[87]; 2019[88]; 2020[89]; 2021[90]; 2022[91]; Flood Re, 2023[92]), Annual Report and Financial Statements; Flood Re (2024[93]), Annual report and accounts 2023-2024; FEMA (2018[94]; 2019[95]; 2020[96]; 2021[97]; 2022[98]), The Watermark. The estimates for France are from CCR (2025[104]), Les catastrophes naturelles en France: Bilan 1982-2024. The estimates for Spain are from CCS (2025[123]), Statistics - Extraordinary Risks: Data Series for 1971-2024.
The multi-peril direct insurance programme in Romania and the flood reinsurance programmes in the United Kingdom have achieved low claims ratios in recent years. The programme in Romania has not faced significant losses in any of the years considered. In the United Kingdom, claims were low relative to the amount of premiums and levy charges collected, although the claims ratio increased significantly in more recent years.
The programmes in Australia, France, Iceland Spain and the Public Insurance Companies for Real Estate programme in Switzerland have faced overall underwriting losses in recent years. In Iceland, the overall underwriting loss is driven by exceptional losses and compensation paid for damages and relocation of residents from the town of Grindavík, which was impacted by earthquakes and volcanic eruptions beginning in late 2023 (NTI, 2025[78]).89 In Spain, the overall loss is driven by the major flooding near Valencia in 2024 which led to EUR 4.9 billion in losses, nearly 5 times more losses than the programme has ever faced from a single event (CCS, 2025[123]).90 Significant reserve accumulation prior to the event protected the programme from requiring additional funds.91 In Australia, Tropical Cyclone Alfred in March 2025 had a significant impact on underwriting performance, which is projected to lead to losses that will account for more than 80% of the losses in the programme’s first years (ARPC, 2025[124]). In Switzerland, the programme is protected by the pooling of excess losses among participating Public Insurance Companies for Real Estate, which was not accounted for in calculating the estimated claims ratio. In France, the average claims ratio for the “CatNat” system92 as a whole has increased to 119% for the period 2016-2024 relative to (a still high) 93% during the period 2010-2024 (CCR, 2025[104]).
The programme in the United States has faced a lower, although still relatively high, claims ratio, mostly driven by significant claims in 2018.93 The programme has faced fairly frequent losses and has borrowed funds from the US Treasury in 22 years since 1980, although only three times since 2010 (Congressional Research Service, 2024[117]). The US Government Accountability Office estimates that the programme could continue to face an annual funding shortfall of USD 1 billion or more until 2032 (during the transition to full-risk based premiums) (GAO, 2023[40]). The programme also likely faced a high claims ratio in 2024 given significant claims from Hurricanes Helene and Milton.
Premium inadequacy could be unexpected, for example, if loss experience has been higher than expected due to changes in hazard frequency or severity or risk assessment weaknesses. Premium inadequacy could also be intentional, if premium rates have been established with the aim of ensuring affordability rather than financial soundness. Given their public policy purpose, and access to government support, flood risk insurance programmes may be able to accept more frequent underwriting losses than a private insurer or reinsurer (OECD, 2021[7]). As above, the fiscal costs that could materialise as a result of premium inadequacy should be considered in the context of whether greater programme financial resilience, through higher premiums, might reduce overall coverage levels, due to reduced affordability, and lead to more substantial needs for public compensation and financial assistance.
In the context of increasing flood losses, a number of programmes have increased premiums. In France, the government announced an increase to the premium rates applied for programme coverage for property insurance, both household and commercial and industrial risks (from 12% to 20%), and for first party motor vehicle coverage (from 6% to 9%) (Ministère de l’Économie, 2023[125]). In the United Kingdom, Flood Re announced a mid-year premium increase that will take affect from October 2025 (Flood Re, 2025[126]) with rates increasing by as much as 20% for the highest council tax band (Harris, 2025[127]). The programme and the UK government also agreed to an increase to the industry levy, from GBP 135 million to GBP 160 million (Flood Re, 2025[126]). As noted above, the US National Flood Insurance Program is also increasing premium rates through the implementation of Risk Rating 2.0.
Form of financial support
The government support provided to flood risk insurance programmes is often limited by a ceiling on payments, compensated in terms of a fee or premium payment from the programme or repayable. Some of the programmes that benefit from a government backstop compensate the government for the support provided by paying a fee or premium. The reinsurance programme in France pays a share of the premiums that it collects (10.8%) to the government as a fee for the provided guarantee while the programme in Türkiye pays a premium for the excess-of-loss reinsurance coverage provided, which is also limited in the amount of coverage provided. In other cases, the government financial support is repayable. Any loans extended by the government to the programmes in Iceland, Romania and the United States are repayable. In Iceland, the obligations of the programme are also limited for any given event to 10% of the programme’s aggregate sum insured (Government of Iceland, 1992[110]). In Italy, a ceiling on the amount of risk that can be assumed by the state-owned reinsurer is established annually (Tayel, 2025[25]). In Spain, while the obligations of the programme benefit from a government guarantee, past funding needs to meet financial obligations were addressed through repayable loans.
Other things equal, fiscal risks would be greatest for programmes that have access to unlimited, non-repayable and uncompensated backstops. However, applying fiscal risk mitigation measures to the government financial support provided to a programme is likely to have other implications.
Establishing a limit on government financial support can help ensure that fiscal risks are identified, managed and mitigated, although any losses that exceed the programme’s capacity, inclusive of the pre-determined financial support, would ultimately be uninsured and could therefore create a need for public compensation and financial assistance.
Establishing a repayment requirement can help ensure that fiscal risks are contained. It could also provide an incentive for the programme to ensure financial soundness and reduce moral hazard. However, repayment obligations could pose a burden on the programme that could ultimately lead to future losses, or a need to raise premiums which could impact affordability. For example, the US National Flood Insurance Program carries a significant outstanding debt burden of USD 20.5 billion and made annual interest payments of USD 619 million in 2023 (FEMA, 2023[128]), equivalent to approximately 19% of premiums collected in fiscal year 2022 or 1.6 times the amount the programme paid for reinsurance coverage (FEMA, 2022[129]). In addition, repayments due shortly after a significant event could coincide with rising reinsurance costs, as reinsurance pricing tends to increase after large events, which could place further pressure on the financial soundness of the programme.
The magnitude of potential fiscal risks that may arise differs across countries, based on: (i) the scope of flood risk assumed and retained by the flood risk insurance programmes with access to explicit government financial support; (ii) programme financial soundness; and (iii) the form of government financial support (Table 5.12).
Note: Dark blue indicates a more significant potential for fiscal risk related to the given risk factor. Medium blue indicates a moderate potential for fiscal risk related to the given risk factor. Light blue indicates a limited potential for fiscal risk related to the given risk factor. White indicates no potential for fiscal risk related to the given risk factor. The fiscal risk factors are: (i) the programme assumes and retains a substantial share of the country’s flood risk (first column); (ii) the programme may not collect sufficient premiums to meet claims (and could therefore require government support) (second column); (iii) the programme has faced past losses beyond its financial capacity (and has called on government support) (third column); or (iv) substantial unlimited, non-repayable or uncompensated (through a fee or premium) government support is available.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table.
The establishment of a flood risk insurance programme could also aim to support flood risk reduction and adaptation. Flood risk insurance programmes can support flood risk reduction by: (i) leveraging and sharing any insights on flood risk gathered by the programme with policyholders, communities and governments responsible for investments in flood prevention; (ii) incentivising flood risk reduction measures by policyholders through premium pricing that reflects risks and premium discounts that reward investments in risk reduction, or by applying risk-related conditions on access to coverage; and (iii) providing direct funding to policyholders for investments in risk reduction, either before or after a loss has been incurred (Table 5.13). Various design characteristics could have an impact on the role of flood risk insurance programmes in risk reduction, including the importance of the programme in assuming flood risk, the type of coverage provided, the relationship of the programme with government, and the programme’s approach to premium pricing. The flood risk insurance programmes that have been established have also placed different levels of emphasis on investing in flood risk reduction and adaptation.
Note: Dark blue indicates a more significant contribution to risk reduction through the given type of contribution. Light blue indicates a limited contribution to risk reduction through the given type of contribution. White indicates contribution to risk reduction through the given type of contribution.
Source: OECD survey on the design and operation of flood risk insurance programmes; OECD (2021[7]), Enhancing Financial Protection Against Catastrophe Risks: The Role of Catastrophe Risk Insurance Programmes; World Forum of Catastrophe Programmes (n.d.[14]), Comparative Table.
5.6.1. Sharing flood risk insights in support of risk reduction
As noted above, the insurance sector has developed sophisticated risk analytical tools to quantify the exposure to flood and other natural hazard risks that is assumed through the coverage provided. These analytical tools make use of meteorology, hydrology and engineering to identify potential flood hazards and the potential damage that could result from these hazards based on the location and structural characteristics of the built environment. The claims data that (re)insurers collect through their activities makes a critical contribution to calibrating these risk analytical tools. The data and insights from risk analytical tools developed by the insurance sector could make a broader contribution to flood risk management and flood risk reduction, including by informing decisions on land-use and building codes and identifying communities or individuals at high risk and possible risk mitigation approaches (OECD, 2023[130]).
The availability of insurance sector analytical tools in different countries is linked, to some extent, to the amount of risk that private (re)insurers have assumed. In general, there tends to be a wider selection of flood risk models in countries where the private insurance sector assumes significant flood risk (Table 5.11).
However, in countries where flood risk insurance programmes assume the vast majority of flood risk, similar risk analytical tools could be, and have been, developed by the programmes directly, leveraging claims data for the entire country and potentially the meteorological, hydrological and engineering expertise available within other government departments and agencies. Programmes that provide direct insurance coverage for most flood hazards and for a broad range of insureds, including households and businesses facing different levels of risk, would likely have broader and more granular access to data that can be used in developing risk analytics and insights.
The programmes that are operated by state-owned or government-linked entities, including in Australia, France, Morocco, New Zealand, Spain and in the Swiss cantons with Public Insurance Companies for Real Estate, share data and insights derived from their (re)insurance and compensation activities with national and sometimes local governments to support investment in risk reduction, although subject to any restrictions related to data and privacy protection.94 In many cases, they also work proactively with governments to identify high-risk areas.
In Australia, the Australian Reinsurance Pool Corporation is working with the National Emergency Management Agency on the development of a national disaster risk profile and is sharing data to identify high-risk communities and prioritise risk mitigation projects and funding for disaster readiness.
In France, the state-owned reinsurer has developed a strategy to promote risk reduction and adaptation which will include efforts to advise relevant governments agencies on effective risk reduction approaches and encourage insurance companies to implement risk awareness and reduction measures with their insureds (CCR, 2025[131]). As part of its 2025 strategic plan, the state-owned reinsurer is developing a new advisory and services offering to reinforce prevention. So far, the services offered include exposure mapping, climate risk diagnostics, consulting services, and customised training programmes.
In Morocco, the Fonds de solidarité contre les événements catastrophiques works with all water and flood management agencies to identify high-risk areas and approaches to risk reduction.
In New Zealand, the Natural Hazards Commission has a Resilience and Research team that leverages science and research on the natural hazards covered by the programme to raise risk awareness at central and local government levels, as well as among businesses and households, and with regulators responsible for critical areas such as building codes. The programme reviews land-use plans developed by local councils and, where relevant, makes submissions to oppose development in high-risk areas. The programme has also released 25 years of claims data for all residential properties in New Zealand in order to provide home buyers and existing residents with key information on risk and the need for risk reduction.95
In Spain, the Consorcio de Compensación de Seguros is involved in the national implementation of the European Union’s Flood Directive, which is aimed at reducing the risk of flood damages in Member States, and provides loss data and loss ratios to support the identification of “Areas of Potential Significant Flood Risk”96 where development should be limited. The programme is also collaborating with the General Directorate for Water on identifying high-risk properties that could benefit from public funding for adaptation and with individual municipalities on adaptation options.
In Switzerland, the Public Insurance Companies for Real Estate contributed to the development of hazards maps that are integrated into all land-use planning and development decisions, and provide feedback on land-use planning in the cantons where they operate.
In the United States, the National Flood Insurance Program, which is part of the Federal Emergency Management Agency, works proactively within government to identify high risk areas and potential risk reduction options. The programme also develops flood hazard maps for the entire country, the Flood Insurance Rate Maps that are used for the pricing of its coverage, and receives a budget appropriation for the development of those maps.
The programmes that are operated by private sector entities also leverage their data and insights to support risk awareness, risk management and risk reduction, although the level of data sharing and advice appears to be more limited, potentially linked to their more limited attachment to government.
In Romania, Pool-ul de Asigurare Împotriva Dezastrelor Naturale has various areas of collaboration with the Romanian General Inspectorate for Emergency Situations although the programme’s claims data is not shared with government agencies or with local communities.
In Switzerland, private insurers and the co-insurance/pooling arrangement among private insurers have contributed to the development of hazard maps in the cantons where they operate.
In the United Kingdom, Flood Re invests significantly in risk awareness initiatives and provides expertise on flood risk to the national government, including by convening experts in property flood resilience and developing information for households on how to improve their property flood resilience (Flood Re, 2025[102]). However, the programme does not share data with the government or engage directly with local governments or high-risk communities to advocate or advise on specific risk reduction measures for individual properties or communities.
While driven by various factors, there is evidence that some of the countries with flood risk insurance programmes have been successful in minimising development in areas that are highly exposed to flood risk (Table 5.14).
Note: The shades of blue signify that a larger portion of the country’s territory is seeing either moderately (10%-50%) or significantly (50%) more rapid growth in areas that are at high-risk of flooding, relative to areas that are at low-risk of flooding. 1 More recent data (up to 2020) was included for some countries in Europe. The darker the shade of blue, the larger the share of the country’s territory that faces moderately or significantly higher growth in high-hazard flood zones. White indicates that no share of the country’s territory faces moderately or significantly higher growth in high-hazard flood zones.
Source: Rentschler et al. (2023[2]), Global evidence of rapid urban growth in flood zones since 1985; Rentschler, Lemke and Avner (2025[132]) Settling in the Zone: Urbanization and Flood Exposure Trends Since 1985 (Europe and Central Asia).
5.6.2. Incentivising risk reduction through premiums and access conditions
Flood risk insurance programmes that make affordable coverage broadly available risk encouraging development in high-areas, unless closely controlled through land-use planning, and could also reduce incentives for risk management and risk reduction where coverage is subsidised for all or some policyholders. The implementation of limits on access to programme coverage and/or risk-based pricing can deliver effective risk signals, provide incentives for risk reduction and reduce moral hazard.
As noted above, some programmes impose conditions on access to programme coverage as a means to mitigate the risk that the programme encourages development in high-risk areas by making affordable coverage available (i.e. to mitigate the risk of moral hazard).
In Belgium, buildings constructed more than 18 months after a zone has been identified as a high-risk flood zone are not eligible to benefit from the premium rates defined by the Bureau de Tarification and can therefore only access coverage in the private market, which is likely to be expensive if the building is at high-risk.
Similarly, in France, insurers are not obligated to extend coverage for natural hazards for: (i) new buildings constructed in zones where construction is not allowed based on the local Plan de Prévention des Risques Naturels (natural hazard prevention plan); or (ii) buildings that were constructed in a zone that was later identified as a zone where construction is not allowed and where identified prevention measures have not been implemented within five years (CCR, 2024[133]).
In Italy, illegal structures or structures without required legal authorisations are excluded (ANIA, 2025[10]).
In Switzerland, the Public Insurance Companies for Real Estate in some cantons can require households or business that have faced damages to undertake improvement measures in order to access coverage.
In the United Kingdom, homes built after 2009 are not eligible for programme coverage. This restriction is aimed at ensuring that the programme does not incentivise new developments in high-risk areas by offering affordable reinsurance coverage, as homeowners will need to depend on private market coverage which would be expensive if flood exposure is high and cannot be transferred to Flood Re.
In the United States, coverage is only available to households and businesses that are located in participating communities. To become a participating community, the local authorities must apply and submit a flood management ordinance that meets or exceeds minimum floodplain management requirements established by the programme. The measure provides the federal government, which has financial exposure to programme losses, with some assurance that flood risk management standards are applied in communities where coverage is being provided as well as a means to influence local flood risk management.
The programmes in Denmark and Norway apply some coverage exclusions for more frequent losses. In the case of Denmark, compensation is only provided for storm surge and inland flood damage with a return period that is assessed to be less frequent than 1-in-20 years. In Norway, the insurance coverage provided through the co-insurance/pooling arrangement will only cover coastal flooding losses if water levels exceed a 1-in-5-year return period. These measures help protect the programmes from repetitive losses incurred by homes or businesses at risk of regular flooding. It also should encourage those households and businesses to implement risk reduction measures, which would likely be a more cost-effective way to address high-frequency losses.
Risk-based pricing could serve to communicate a price signal to policyholders on the level of flood risk that they face and provide an incentive to implement risk reduction measures in order to reduce the amount they need to pay for flood insurance coverage. As noted above, the programmes in Australia, Türkiye and the United States implement, or will implement, risk-based pricing for the flood coverage that they provide and therefore should provide a risk signal to policyholders and some incentives for implementing risk reduction measures. In Italy, insurance companies are required to set premiums that are proportional to the risk and take into account risk reduction measures implemented by policyholders (Persano Adorno, 2025[59]).
Some programmes have identified specific measures that policyholders can implement in order to receive a defined reduction in their premium. In Australia, discounts have mostly been aimed at wind mitigation, such as roof tie-down and window and garage door bracing, although a specific discount for flood mitigation will be introduced for SMEs from April 2026 (ARPC, 2025[134]). In the United States, the National Flood Insurance Program offers discounts based on the elevation of the first floor above the ground, taking into account the foundation type and with additional discounts for the inclusion of flood openings that allow floodwaters to pass through, as well as the placement of machinery, equipment and appliances at elevations above the first floor (FEMA, 2022[135]). In the United Kingdom, Flood Re is developing a scoring methodology to measure the effectiveness of property flood resilience investments that will be used to create flood performance certificates97 aimed at facilitating the provision of lower pricing and premium discounts for effective property-level flood risk reduction measures (Flood Re, 2023[136]).
Programmes that provide direct insurance should have a greater capacity to ensure that policyholders receive risk signals and related incentives as the programme is responsible for setting and applying pricing decisions and offering premium discounts. It may be more difficult for a reinsurance programme to ensure that the price signals incorporated into reinsurance pricing is consistently passed on by the reinsured direct insurers.98 However, reinsurance programmes that assume all of the risk, as in Australia and the United Kingdom, may be better able to ensure that risk signals and premium discounts are transmitted to policyholders as insurers are not retaining much risk and should be able to pass on the programme pricing. As noted above, the Australian Competition and Consumer Commission is monitoring the premium-setting practices of direct insurers to ensure that the benefits of the Cyclone Reinsurance Pool are passed on to policyholders.
The price signals and premium discounts will also be more effective where policyholders have the capacity to make effective investments in risk reduction and where effective risk reduction measures can be implemented at the level of individual properties, rather than at the community-level. The OECD’s examination of the insurance sector contribution to climate adaptation identified a number of challenges to the implementation of risk reduction measures by policyholders, including a lack of awareness of possible risk reduction or adaptation investments and insufficient access to funding for investing in risk reduction or adaptation (OECD, 2023[130]). As discussed in the following section, some programmes are providing financial support for policyholder risk reduction.
In addition, for some risks, property-level risk mitigation may be significantly less cost-effective than investments made at the community level. This challenge may be particularly relevant in the case of flood risk given the potential for community-level risk mitigation investments, including both structural flood control measures such as flood barriers as well as nature-based flood risk reduction measures, to significantly reduce exposure to flood risk for all properties within the community. Some programmes have responded by providing incentives and/or premium discounts for community-level risk reduction measures. In France, the standard deductible applied to insured natural hazard losses can be increased in communities where more than two covered events have occurred within five years and where a Plan de Prévention des Risques Naturels has not been developed. The deductible can be doubled for three events within five years, tripled for four events and quadrupled for five events (CCR, 2024[133]). In the United States, the National Flood Insurance Program provides policyholders in participating communities with discounts based on community-based risk reduction measures, such as additional flood mapping, risk mitigation in new developments, measures to reduce losses in existing developments, improved emergency preparedness and public awareness initiatives (FEMA, 2017[137])). The discounts can also be withdrawn if the community is found to have not implemented the risk management measures for which the discounts were provided.99 The National Flood Insurance Program’s Community Rating System has been found to be effective in reducing flood losses in participating communities100 although there is some evidence that communities with larger populations and higher levels of educational attainment are better placed to participate in, and incur benefits from, the system (Cano Pecharroman and Hahn, 2024[138]).
5.6.3. Funding risk reduction activities
As noted, a key impediment to the effectiveness of policyholder risk reduction incentives is the cost of implementing risk reduction measures. For example, recent OECD work (OECD, 2023[130]) estimated that it could take close to 30 years for those at lower risk, i.e. those facing a less frequent than 1-in-100 year flood return period, to recoup the cost of dry floodproofing a home through premiums discounts.
Some programmes are providing direct funding for community and policyholder risk reduction.101 For example, in Switzerland, the Public Insurance Companies for Real Estate provide funding for up to 50% of the cost of loss prevention measures and invest approximately CHF 80 million annually on risk reduction. In the United Kingdom, insurers and the programme have established a Build Back Better programme to make GBP 10 000 in funding available to integrate resilience measures into the post-event repair of insured properties. The programme is available to those whose property is reinsured by Flood Re as well as those covered solely by participating insurers (i.e. insurers that participate in the programme make the funding available to all policyholders, not just those reinsured through Flood Re). In the United States, the National Flood Insurance Program offers an additional “Increased Cost of Compliance” coverage that provides up to USD 30 000 to insured policyholders to allow them to elevate or relocate their homes or floodproof their business premises in order to be compliant with updated floodplain management requirements in their community (FEMA, 2023[139]). As noted above, flood risk insurance programmes. particularly where the programme has a strong relationship with government, can also play a role in facilitating access to, or supporting the targeting of, public sector funding for property-level risk reduction. The programme in Spain has provided advice on where to focus government support.
The existence of a programme might also make it easier to implement important, although often controversial, risk reduction measures such as managed retreat (i.e. relocation away from high-risk zones). Some of the programmes have recent experience in supporting managed retreat for other natural hazards. For example, in Iceland, the programme worked with the government to arrange a buy-out of the properties in the town of Grindavik impacted by volcanic eruptions. Under the arrangement, the programme agreed to provide an insurance payment of 95% of the sum insured to allow residents to relocate elsewhere, with a special purpose real estate company established to take-over the homes and the responsibility for demolition (Sigurdardottir, 2024[140]), (NTI, 2024[141]). In New Zealand, approximately 8 000 homes were designated part of a 'Residential Red Zone' following the 2010–2011 Canterbury earthquakes, due to the land being associated with a risk of severe damage due to liquefaction if future earthquakes occurred. The government offered to purchase insured residential properties from homeowners on an 'opt-in' basis, along with vacant residential land, and assumed the rights to related insurance claims. This type of managed retreat could also make a significant contribution to reducing the risk for communities prone to flood.
Increasing flood hazard and continued development in areas exposed to flooding has led to an increase in losses from floods. An increasing number of countries have, or are establishing or expanding, public-private insurance programmes to support the availability of affordable insurance coverage for flood risks. Public-private insurance programmes that provide coverage for flood risk have been established, or will soon be established, in 14 of 38 OECD Members. These programmes have supported the availability, affordability and take-up of flood insurance coverage. The share of economic losses that are insured in countries with programmes that cover flood risk is higher than the average for OECD Members, with only a few exceptions. These programmes also contribute to reducing overall public sector exposure to flood risk and supporting risk reduction and adaptation.
Countries have taken different approaches to the design of flood risk insurance programmes, reflecting different objectives and country and market characteristics. The design of flood risk insurance programmes differs in terms of covered hazards, eligible insureds, type of compensation or (re)insurance provided, role of the programme in the market, approach to premium pricing, and the role of government in providing financial support and oversight. While these different approaches can all be effective in addressing protection gaps in flood insurance, the different approaches to programme design can lead to different outcomes. This chapter has aimed to outline the potential implications of different programme design choices on four possible programme objectives: (i) achieving broad flood insurance coverage; (ii) leveraging private insurance sector expertise and capacity; (iii) minimising impacts on public finances; and (iv) encouraging and supporting flood risk reduction – consistent with the G7 High-Level Framework for Public Private Insurance Programmes against Natural Hazards.
Programmes that play a larger and more direct role in assuming flood risk, for example by providing direct insurance for a broad scope of flood hazards and insureds, are generally able to ensure the availability of affordable coverage. However, broad coverage may not be achieved without the implementation of measures to support take-up, such as automatic inclusion of flood coverage or broadly applicable mortgage-related flood insurance requirements. Countries with lower levels of property insurance penetration are also likely to face coverage gaps, even where programmes make affordable flood insurance coverage broadly available. Programmes with a larger role in covering flood risk could, however, miss opportunities to leverage private market expertise and capacity to assume risks. They could also increase fiscal risks if premiums are inadequate and the government provides a generous backstop for programme losses.
Programmes that are more focused on addressing specific market gaps in coverage are generally better able to leverage private market expertise and risk-bearing capacity. However, the establishment of programmes targeted at markets gaps will likely lead to a risk pool containing more high-risk properties which could lead to greater loss volatility. More narrowly targeted programmes are also likely to face more challenges in achieving broad coverage if the private insurance market is unable or unwilling to provide coverage for hazards or insureds that are not eligible for programme coverage, which could lead to demands for public compensation or financial assistance to respond to uninsured losses.
Requirements for insurers to offer flood coverage or for households or businesses to acquire flood insurance coverage are usually effective in supporting take-up of coverage. However, such requirements could have implications for policyholders if the required coverage is unaffordable or for insurers if they are required to assume risk that they do not have capacity to assume. Ensuring that coverage is affordable for all policyholders required to acquire such coverage will be critical although this is challenging to achieve without some form of subsidisation for high-risk policyholders, which can have potential implications on fiscal risk and exacerbate moral hazard.
The application of risk-based pricing in programme coverage can provide important risk signals and incentives for risk reduction. However, the effectiveness of pricing incentives in encouraging risk reduction will depend on the capacity of policyholders to invest in risk reduction. Risk-based pricing can also lead to affordability challenges for those at high-risk, and political challenges if those at high-risk are obligated to acquire flood insurance coverage. Cross-subsidies, or greater risk mutualisation, among low and high-risk policyholders is commonly applied in flood risk insurance programmes, particularly those that cover multiple natural hazard risks, although this approach can blunt incentives for risk reduction and potentially incentivise development in high-risk areas. This risk can be mitigated through the implementation of effective land-use controls and resilient building standards, and a number of programmes have incorporated risk management requirements, conditions or incentives to reduce the impact of limited risk signals in premium pricing.
Supporting risk reduction and adaptation will be critical for addressing rising flood losses, whether flood insurance coverage is provided through private insurers, a flood risk insurance programme or both. Flood risk insurance programmes that have direct links to governments have sometimes demonstrated a greater potential to leverage that relationship to influence broader risk reduction, although a number of private sector programmes are also contributing to flood risk management.
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← 1. Flooding can also be caused by a tsunami, landslide or dam burst although flood insurance is usually focused on pluvial, riverine and coastal flooding. Water damage from a tsunami would normally be covered by earthquake insurance while flooding from a dam burst might be covered by the liability insurance of the owner or operator of the dam.
← 2. Average annual economic losses in OECD Members in 2020-2024 reached USD 31.9 billion, and USD 34.3 billion when including accession candidate countries, relative to USD 17.8 billion and USD 23.3 billion, respectively, in 2000-2019 (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.). OECD Members and accession candidate countries are: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile. Colombia, Costa Rica, Croatia, Czechia, Denmark, Estonia, Finland, France, Germany, Greece. Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Peru, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Thailand, Türkiye, the United Kingdom and the United States.
← 3. The average annual number of very heavy precipitation days are projected to increase in Czechia (100% increase), Greece (100%), France (104%), Finland (104%), Colombia (107%), Ireland (109%), Denmark (113%), the United Kingdom (119%), Germany (120%), Korea (120%), Lithuania (121%), Sweden (124%), Norway (128%), Türkiye (131%), Latvia (137%), Estonia (144%), Switzerland (146%), Luxembourg (150%), Canada (152%), Japan (153%), Peru (157%), Thailand (158%), Brazil (161%), the United States (166%), Chile (172%), Indonesia (193%), New Zealand (197%) and Argentina (580%) in 2080-2099, relative to 2020-2039, under an intermediate emissions scenario (Shared Socio-economic Pathway 2-4.5) (OECD, 2025[5]).
← 4. The lower figure is calculated including all loss years, the higher figure excludes loss years for which only an estimate of economic losses (not insured losses) was available. OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.).
← 5. Pluvial or flash flooding can occur anywhere although those at lower relative elevation may still face higher risk than households or businesses at higher relative elevation. As noted above, a changing climate is expected to lead to more episodes of extreme rainfall in many countries (OECD, 2025[5]).
← 6. In the United Kingdom, the second largest mortgage provider has reportedly stopped extending mortgage credit to households that the lender deems may become uninsurable in the future (Shankleman, 2024[145]). Similarly, a major lender in the Canadian province of Québec announced that it would no longer offer new mortgages to households located in high-risk flood zones (those located in floodplains expected to face flooding more frequently than 1-in-20 years (Shingler, 2024[146]). In France, some mortgage brokers have reported increasing challenges in accessing mortgage financing for homes in high-risk zones, particularly coastal areas (Clerima, 2024[153]). In the United States, an analysis by the Federal Reserve Bank of New York found some evidence that banks were more reluctant to extend some types of loans (i.e., loans that they are normally more likely to retain on their balance sheet) to borrowers in communities where flood risk exposure is likely higher than accounted for in the flood hazard maps developed by the Federal Emergency Management Agency for use by the National Flood Insurance Program (Blickle et al., 2023[147]).
← 7. The report is based on responses to a questionnaire circulated to public-private insurance programmes, directly and through the World Forum of Catastrophe Programmes, complemented by desk research undertaken by the Secretariat. This report incorporates comments received from delegates to the Working Party on Insurance and Pensions, members of the OECD High-Level Advisory Board on the financial management of catastrophe risk and the public-private insurance programmes included in the report.
← 8. The objectives are consistent with those found in the High-Level Framework for Public Private Insurance Programmes against Natural Hazards, welcomed by G7 Finance Ministers and Central Bank Governors in May 2024, and which provides a set of considerations for the establishment of public-private insurance programmes to address protection gaps for natural hazard risks (G7 Finance Track, 2024[163]). The Framework was developed by the G7 Climate Change Mitigation Working Group, based on input from the OECD and IAIS secretariats.
← 9. For the purposes of this report (and consistent with (OECD, 2021[7]) and (OECD, 2023[176])), public-private insurance programmes include any type of arrangement established by the insurance sector and/or government to provide insurance, co-insurance, reinsurance and/or a government guarantee for losses resulting from catastrophe perils to all or specific types of potential policyholders, including purely private sector arrangements such as insurance sector co-insurance/pooling arrangements and purely public arrangements such as the establishment of one or more public insurers to provide insurance coverage for catastrophe perils. It does not include government-owned insurance companies that operate in many lines of business and that have not been specifically established to cover catastrophe perils or other property-related risks nor government-owned insurers targeting other specific lines of business.
← 10. The Canadian Federal Budget in 2024 included funding for the establishment of a low-cost flood insurance program by the Canada Mortgage and Housing Corporation (Department of Finance Canada, 2024[20]) although further funding to establish the programme was not included in the government’s Economic and Fiscal Update in December 2024 (Insurance Bureau of Canada, 2024[162]).
← 11. In Türkiye, Doğal Afet Sigortaları Kurumu (Turkish Catastrophe Insurance Pool), in collaboration with the Insurance and Private Pension Regulation and Supervision Agency (SEDDK), is introducing a compulsory multi-hazard disaster insurance programme that will expand existing coverage for earthquake risks to include coverage for floods, landslides, hurricanes, hailstorms, wildfires and avalanches (Bahar, 2024[22]).
← 12. The 2025 statutory review of the Terrorism and Cyclone Insurance Act will consider whether the coverage period should be extended to 168 hours after the beginning of a Declared Cyclone Event, from the current 48 hours (The Treasury, 2025[174]).
← 13. Damages from overflow of existing waterways or due to “villbekker” (a fast-moving stream of water down a slope) as a result of heavy precipitation are covered.
← 14. In Türkiye, offices, commercial or (light) industrial companies that are located in an apartment or residential building are also eligible for programme coverage.
← 15. In the United Kingdom, programme coverage is not available for rental properties.
← 16. In Australia, the programme would also provide coverage for strata properties, as long as the strata is at least 50% dedicated to residential purposes.
← 17. The amount of coverage that the insurer must provide, and that the insured must acquire, varies based on the value of the businesses’ property, land and equipment. Companies with a value of up to EUR 1 million must acquire an insured limit equal to that value. Companies with a value of EUR 1 million to EUR 30 million, must acquire an insurance limit equivalent to at least 70% of that value. Companies with a value above EUR 30 million have flexibility in determining the insurance limit acquired (ANIA, 2025[10]).
← 18. In Belgium, a classification of high-risk zones is periodically published. Any building that is constructed in a high-risk zone more than 18 months after that zone was identified as high-risk is not eligible to access a premium rate for flood risk defined by the Bureau de Tarification nor for compensation through the co-insurance/pooling arrangement established for properties that have accessed coverage with the assistance of the Bureau de Tariffication (Kingdom of Belgium, 2014[8]).
← 19. In Switzerland, the Interkantonaler Rückversicherungsverband arrangement among the Public Insurance Companies for Real Estate operates a co-insurance/pool arrangement that collectively acquires reinsurance and another co-insurance/pooling arrangement that has been established to share excess losses above the coverage provided by through the acquired reinsurance.
← 20. Twelve insurers (accounting for 90% of the market) participate in the Swiss co-insurance/pooling arrangement among private sector insurers (Swiss Insurance Association, 2021[143]). All insurance companies that offer property insurance in Norway are obligated to participate in the co-insurance/pooling arrangement.
← 21. At the time of writing, the pooling arrangement in Italy included the participation of approximately 75% of insurance companies.
← 22. When establishing the programme in the United Kingdom, households at lower risk of flooding were generally able to acquire coverage from private insurers at a lower price than Flood Re would charge the insurer to assume the risk, meaning that only higher risk households would normally access coverage that is reinsured by the programme (DEFRA, 2014[148]).
← 23. In Australia, insurance companies that exceed a Gross Written Premium threshold are required to cede all cyclone-related wind, storm surge and cyclone-relate flood risk to the programme although insurance companies may exclude coverage provided to households and businesses in an established list of postal codes deemed to be at low-risk of cyclone-related flood (and wind) damage in their calculation of Gross Written Premium (ARPC, 2022[101]). As a result, insurers that do not provide sufficient coverage in higher risk areas may choose not to cede their cyclone and cyclone-related flood risk to the programme.
← 24. There is a EUR 5 billion overall ceiling on risk that can be assumed by the public reinsurer in 2025 (Hallo, 2025[157]), with the possibility that the ceiling may be increased in future years, based on amounts paid by the public reinsurer in the previous year (Tayel, 2025[25]).
← 25. In Switzerland, the premium charged for natural hazard insurance coverage by private insurers is a fixed rate based on the sum insured although some Public Insurance Companies for Real Estate charge differentiated premiums based on construction characteristics and other relevant factors (e.g. the Public Insurance Companies for Real Estate in Basel canton (Basellandschaftliche Gebäudeversicherung, n.d.[164])).
← 26. In 2023, the premium rate for more resilient homes (“Type A”) was increased although the rate for less resilient homes (“Type B”) remained the same as Type B homes account for only a small share of the programme’s portfolio (approximately 5%) and are generally lower-income households.
← 27. As a reinsurance provider, Flood Re is mainly overseen by the prudential supervisor.
← 28. The Consorcio de Compensación de Seguros has decided to adhere to the requirements included in Solvency II, despite a specific exclusion from those requirements.
← 29. Any co-insurance/pooling arrangement or consortium established by the insurance sector to assume natural hazard risks is required to register with, and may require approval from, the insurance supervisor (IVASS) (Iannitti and Bonato, 2025[158]).
← 30. The compensation programme for uninsured households in Morocco is overseen by a board with representation from various government departments, the insurance supervisor and the private insurance sector.
← 31. In the United Kingdom, the government needs to agree to any changes to risk retention, reinsurance and the levy collected to fund the operations of Flood Re.
← 32. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for both residential and commercial properties in Spain (EIOPA, 2025[26]). In Switzerland, market penetration of insurance coverage for all types of flood hazards is estimated to be 99% by Insurance Europe (Insurance Europe, n.d.[27]).
← 33. For example, flooding in early 2022 in southern Queensland and northern New South Wales that was unrelated to a cyclone led to over AUD 6 billion in claims payments (Chow et al., 2023[28]; Insurance Council of Australia, 2024[149]). A recent Parliamentary Committee inquiry into insurers’ responses to major flooding in 2022 recommended that the Australian Government examine ways to improve the affordability of flood insurance, including the appropriateness of a government supported reinsurance arrangement (House of Representatives Standing Committee on Economics, 2024[154]).
← 34. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for both residential and commercial properties in Iceland and Norway, “high” for commercial properties in Italy although “medium” in the case of coverage for coastal flooding in Italy (EIOPA, 2025[26]). In Australia, flood insurance is “generally available” in all parts of Australia for households and businesses (Chow et al., 2023[28]) and is included in an estimated 93% of residential property insurance policies (as of 2020) (Lilly, 2024[29]).
← 35. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for both residential and commercial properties in Denmark (EIOPA, 2025[26]), which likely refers to the availability of coverage for pluvial flooding.
← 36. In Australia, the programme provides coverage for strata properties that are at least 50% dedicated to residential purposes. As a result, a large business that is located within an eligible strata property would be covered by the programme.
← 37. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for commercial properties in Belgium (EIOPA, 2025[26]). In Australia, flood insurance is “generally available” in all parts of Australia for households and businesses (Chow et al., 2023[28]). In the United Kingdom, various studies have found only a limited share of small businesses in high-risk areas have had difficulties accessing flood insurance (Browning, 2023[31]; BMG, 2022[30]). However, in their response to the OECD survey on flood risk insurance programmes, Flood Re indicated that there is some anecdotal evidence of challenges in accessing commercial flood insurance coverage.
← 38. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “medium” for commercial properties in Romania, although “high” for residential properties (EIOPA, 2025[26]).
← 39. The New Zealand Treasury receives quarterly reports on residential insurance availability and pricing. The report from August 2023 found that online quotes for insurance coverage were available from two or more insurance companies for almost all of the examined regions, which included communities at higher risk of flooding (Finity Consulting, 2023[32]). The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “medium” for residential properties in Italy (EIOPA, 2025[26]).
← 40. The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for residential properties in Belgium (EIOPA, 2025[26]).
← 41. The programme coverage for flood risk will be an expansion of the existing first loss or limited coverage for earthquake risk provided by the programme (Bahar, 2024[22]) so the applied limits are likely to be equivalent. However, the new coverage will introduce a new “immediate needs coverage” for additional expenses that will be capped at 10% of the sum insured (Bahar, 2024[22]).
← 42. In their responses to the OECD survey on flood risk insurance programmes, Romania and Türkiye identified the limit on coverage provided by the programme as a potential gap in coverage as insured households would need to purchase additional “facultative” coverage from private insurers. In Romania, close to 25% of households with programme coverage do not have additional coverage (beyond the programme coverage (although it is unclear whether this is due to a lack of availability, affordability or take-up).
← 43. While direct insurers in France are similarly responsible for making decisions on whether to offer coverage, the Bureau Central de Tarification has the authority to require an insurer to provide coverage for the natural hazard risks within the scope of the programme. A prospective insured can notify the Bureau Central de Tarification if an insurance company refuses to provide coverage for natural hazard risks covered by the programme. The Bureau Central de Tarification can then require the insurer chosen by the prospective insured to provide the coverage and determine the premium (Bureau Central de Tarification, n.d.[165]). The stop-loss reinsurance coverage provided by the state-owned reinsurer offers protection for insurance companies against high losses.
← 44. In Italy, insurance companies are obligated to provide a minimum level of coverage based on the value of the companies’ property, land and equipment. For companies with up to EUR 1 million in insurable value, the insured limit must be equivalent to the insurable value. For companies with between EUR 1 million and EUR 30 million, the insured limit must be at least 70% of the insurable value. For larger companies, there are no requirements on the level of coverage that insurers must provide. In addition, insurers are required to calculate their risk tolerance limit for natural hazard risks on an annual basis and may refuse to provide further coverage once this tolerance limit has been reached (d’Elia and Fumarola, 2025[62]).
← 45. In Australia, policyholders may be subject to a deductible on the insurance they acquire but insurers are not subject to a deductible on the reinsurance coverage provided by the programme. In the United Kingdom, the programme imposes a deductible on the reinsurance coverage that they provide while insurers are responsible for determining the deductible applicable to policyholders.
← 46. As noted above, flood insurance is “generally available” in all parts of Australia for households and businesses (Chow et al., 2023[28]). The EIOPA Dashboard on insurance protection gap for natural catastrophes indicates that the availability of flood insurance is “high” for residential and commercial properties in France, “high” for commercial properties in Italy although “medium” in the case of coastal flooding (EIOPA, 2025[26]). In the United Kingdom, flood insurance coverage for residential properties appears to be widely available as only 0.19% of household insurance policies sold or renewed in 2021-2022 applied an exclusion for flood risk (BMG, 2022[36]).
← 47. The monitoring report found that there have been no new insurer entrants providing coverage in high-risk areas and limited appetite among existing insurers to expand or increase their overall exposure although that some insurers have made changes to underwriting controls and exposure limits (ACCC, 2025[38]).
← 48. The cost of reinsurance tends to decline as the level of diversification increases so the cost to reinsure a single (diversified) pool of risks should be lower than the aggregate cost of reinsuring multiple (less diversified) pools of risks.
← 49. As noted above, the programmes in Iceland, Romania, Spain, Türkiye, United Kingdom, and the private insurers in Morocco, Norway and Switzerland that participate in co-insurance/pooling arrangements, are subject to the same regulatory and supervisory requirements applied to private insurance or reinsurance companies.
← 50. If low-risk and high-risk policyholders are paying the same amount of premium, relative to the sum insured, and the overall amount of premiums collected is in line with expected claims, then low-risk policyholders are likely paying more than their share of claims. However, this relationship is more complex when programmes provide coverage for multiple natural hazards as cross-subsidies may also be applied between the different hazards.
← 51. As outlined in the section below on the Scope of risks assumed and retained, all of these programmes assume a significant share of the flood risk in the countries that they operate.
← 52. According to Flood Re, households at high-risk of flooding may face premium quotes that are 50-60% higher than other households.
← 53. The report found that premiums for households in areas facing medium and high levels of cyclone risk were 11% lower relative premium rates prevalent before the pool was operational and that small businesses premium rates in these areas declined by 24% (ACCC, 2025[38]).
← 54. IVASS is collecting data on premium rates, deductibles, the sum insured and other characteristics for all property insurance policies issued to businesses within the scope of the mandatory insurance requirement (IVASS, 2025[175]).
← 55. According to an analysis by the US Government Accountability Office (GAO), approximately 66% of NFIP policyholders face premium increases under “Risk Rating 2.0.” of which almost half face premium increases of 100% or more. Premium increases are limited by statute to 18% per year, which means, according to GAO calculations, that more than 30% of all NFIP policyholders will continue to benefit from subsidised premiums until 2026 and it could take until 2037 before 95% of NFIP policyholders pay full risk-based premium rates (GAO, 2023[40]).
← 56. In New Zealand, for example, it was found that approximately 20% of the premium quotes from insurers for homes at high-risk of flooding included an additional flood premium charge of NZD 250 (on average), with substantial variation across insurers in terms of when this surcharge is applied (Lilly, 2024[29]).
← 57. Some countries that have not established flood risk insurance programme have implemented, or are considering the implementation of, mandatory flood insurance purchase requirements. In Greece, businesses with annual gross revenues above EUR 500 000 are required to acquire insurance against flood, earthquake and forest fire risks although there is an exemption for companies unable to secure the required coverage (Kitsou and Brouma, 2025[159]). In Indonesia, recent legislation authorises the government to establish mandatory insurance for household against disaster risks (Government of Indonesia, 2023[160]) although no requirement had been implemented at the time of writing.
← 58. In Italy, the requirement is being phased in over time with large companies subject to the requirement from 31 March 2025; medium-sized companies from 31 October 2025; and small and micro-enterprises from 31 December 2025 (ANIA, 2025[21]).
← 59. Fire insurance is mandatory in all cantons where Public Insurance Companies for Real Estate operate and in some cantons where private insurers operate.
← 60. There are also property insurance requirements for households with mortgages in a number of countries where flood insurance is automatically included in standard property insurance, such as France, Spain and in Swiss cantons without a mandatory insurance requirement, which means that, in practice, flood insurance is also a requirement for those with mortgages.
← 61. Special Flood Hazard Areas are zones defined by the National Flood Insurance Program as having a 1% or greater probability of being flooded in a given year (FEMA, 2020[45]).
← 62. Households that do not comply with the requirements are not eligible for any government financial assistance or compensation for damages to their home resulting from the covered natural hazards from either national or local governments and can face a fine of RON 100 to RON 500 (i.e., up to almost 4x the cost of an insurance policy for more resilient homes) (PAID Romania, 2021[34]).
← 63. Property insurance data was not available for New Zealand and Morocco in the OECD Insurance Statistics database for 2024.
← 64. According to UNESPA, 79.5% of households in Spain are protected against climate risks, which includes the coverage provided by private insurers and the programme (UNESPA, 2025[51]).
← 65. According to Swiss Re, New Zealand has a higher level of non-life insurance penetration and density than Morocco (Casanova Aizpun et al., 2023[106]).
← 66. Data on share of homeowners with an outstanding mortgage was not available for Türkiye.
← 67. For example, in the US state of California, limits on premium increases and increasing losses from wildfires, which are automatically covered in most property insurance policies, have been cited as factors in the decisions of a number of insurers to stop or severely restrict new property insurance policy applications or renewals (Rivera, 2024[144]).
← 68. One study estimated that, between 1972 and 2014, at least 27% of flood claims and 14% of claims payments were related to properties outside of Special Flood Hazard Areas (Wing et al., 2020[166]). According to one estimate, the actual number of properties in the United States that face a 1% annual probability of flooding, and should therefore be included within the NFIP’s Special Flood Hazard Areas, is approximately 2.2 times higher due to outdated flood maps and the exclusion of heavy rainfall from those maps (First Street, 2025[167]).
← 69. In addition, for some events, the claims paid reported by the programme seem to be higher than the insured losses reported in the Swiss Re sigma database. For example, the programme estimates claims of approximately EUR 4.8 billion related to the flooding in Valencia in 2024 (CCS, 2025[168]), which is approximately 20% more than insured flood losses reported in the Swiss Re sigma database, although this may be partly due to the difference between estimated claims and claims paid. The Valencia floods accounted for more than 60% of reported flood losses in Spain since 2000 (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)).
← 70. The programmes in France, Norway, Spain and Switzerland do not offer direct financial subsidies to policyholders purchasing property insurance, whether for households or businesses. However, the elevated penetration rate of property insurance coverage effectively functions as an implicit cross-subsidisation mechanism.
← 71. For example, between 2010 and 2014, the programme paid out approximately USD 150 million for flood and storm surge compensation (Danish Natural Hazards Council, 2017[169]) relative to approximately USD 1.9 billion in insured flood losses during that period (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.).
← 72. In Spain, there is no legal impediment to transferring risk to reinsurance markets should the need arise.
← 73. In determining whether they meet the AUD 10 million threshold for mandatory participation in the programmes, insurers can exclude premiums written in areas where cyclone risk is negligible (ARPC, 2025[170]).
← 74. A stop-loss protection provides additional coverage for an accumulation of losses in a given period. Under a stop-loss arrangement, some or all of the losses incurred by the cedant above a specific threshold are assumed by the reinsurer.
← 75. In 2016, the commercial operations of CCR were transferred to a wholly-owned subsidiary, which was then acquired by a private sector consortium (Arundo Re, 2025[171]).
← 76. In its first years of operation, the amount that insurers could transfer to CCR was not limited to 50%. Higher cessions in the first years, and high claims payments through the stop-loss facility in large loss years, explain the average risk transfer level above 50%. Since approximately 1995, the share of claims paid by CCR has been near or just below 50%, with the exception of large loss years in 2003, 2017, 2022 and 2024 (CCR, 2025[104]).
← 77. For most (lower risk) households in the United Kingdom, the cost of flood insurance should be below the amount that Flood Re charges for its reinsurance coverage. As a result, direct insurers are likely to retain the risk for most of the coverage that they provide to lower-risk households (ABI, 2024[152]). Over 2023 and 2024, Flood Re claims payments (Flood Re, 2025[102]) were equivalent to approximately 30% of reported insured flood losses in the United Kingdom (OECD calculations based on data provided by Swiss Re (Swiss Re, sigma database. All rights reserved.)).
← 78. A requirement to transfer all risk to the programme, which is sometimes implemented by terrorism risk insurance programmes, could reduce the risk of adverse selection for the programme (i.e. if insurers only transfer the risks that they do not wish to retain to the programme).
← 79. Insurers with better quality and more granular data on the risks that they have underwritten can generally obtain more favourable terms (and pricing) for reinsurance coverage (Lilly, 2024[29]).
← 80. Flood Re’s retrocession costs increased by approximately GBP 100 billion in 2025/2026 (Flood Re, 2025[102]).
← 81. Some programmes have developed their own catastrophe models and analytical tools. For example, the state-owned reinsurer in France has developed an in-house deterministic modelling tool as well as its own flood-hazard map at address level.
← 82. For example, in Spain, it’s been estimated that the programme will absorb 90%-95% of the insured losses from catastrophic flooding in Eastern and Southern Spain in October 2024 (Bray, Nieto and Wilson, 2024[156]).
← 83. The programme borrowed USD 16.6 billion to respond to flood claims after Hurricanes Katrina, Rita, and Wilma in 2005, USD 6.25 billion after Hurricane Sandy in 2012 and USD 7.425 billion after Hurricanes Harvey, Irma, and Maria in 2017, although USD 16 billion in outstanding debt was cancelled (Congressional Research Service, 2024[117]). In 2025, the programme borrowed USD 2 billion to respond to more than USD 10 billion in projected claims related to Hurricanes Helene and Milton (FEMA, 2025[161]).
← 84. Governments in some countries may be prepared to provide more generous access to the government financial support and therefore take on a greater exposure to programme losses. Government that have sufficient fiscal space and/or inexpensive access to debt markets are likely better placed to offer more generous financial support and may be willing to take on more risk if the purchase of additional reinsurance protection by programme would have a significant impact on the affordability of programme coverage. However, the cost of accessing funding to provide financial support to a programme is not stationary and will likely vary over time. Furthermore, a generous government backstop could lead to moral hazard as the programme and the private sector participants in the programme may face more limited incentives to limit the exposure taken on through the programme given the ability to shift substantial programme costs to the government.
← 85. For example, in France and Spain, the programmes only provide coverage for wind damages if the wind speed was measured to be above a specific threshold and private insurers are required to provide coverage for losses if the measured wind speed was below the threshold) (OECD, 2021[7]).
← 86. For example, the exclusion of programme coverage for high-frequency hazards as in Denmark and Norway
← 87. Programmes that provide coverage for a broader range of hazards or insureds, including different types of insureds and insureds facing different levels of risk, will have larger risk pools with a greater level of diversification. Programmes that only assume risks that private insurers or reinsurers are unwilling to cover will have smaller risk pools comprising high-risk properties that will likely be subject to more frequent losses and greater volatility (OECD, 2021[7]).
← 88. The programme in Australia is too recent to be included. The Cyclone Reinsurance Pool aims to set premiums for reinsurance coverage at a rate that will be cost neutral to government over the long-term. The programme in New Zealand was not included given the limited coverage provided for flood damage (and the significant coverage provided for other natural hazards, notably earthquakes).
← 89. The aggregate claims ratio for the programme in Iceland was only 10% between 2017 and 2022.
← 90. The aggregate claims ratio for the programme in Spain was only 55% between 2017 and 2023.
← 91. The Consorcio de Compensación de Seguros had reportedly accumulated an equalisation reserve of EUR 10.3 billion as of the end of 2023 (De Cicco and Alvarez, 2024[172]).
← 92. Given its role in providing reinsurance for the entire market, the state-owned reinsurer reports claims ratios for the system as a whole including the premiums collected and losses incurred by private direct insurers for natural hazards included in the scope of the programme.
← 93. The estimated claims ratio was 280% in 2018, 61% in 2019, 45% in 2020, 44% in 2021 and 56% in 2022.
← 94. The programme in Türkiye also plans to share loss data with relevant government authorities.
← 95. The claims data is available at: https://www.naturalhazardsportal.govt.nz/s/.
← 96. The Floods Directive requires national authorities to identify “Areas of Potential Significant Flood Risk” based on preliminary flood risk assessments for all river basins, develop flood hazard and risk maps for the identified areas and then prepare Flood Risk Management Plans to manage the risk of flooding in those areas (Neuhold, 2017[150])
← 97. Flood Re jas published a “roadmap” for the implementation of flood performance certificates (Flood Re, n.d.[173]).
← 98. For example, one examination of the premium discounts provided by the Florida Hurricane Catastrophe Fund (which operates as a reinsurance fund for hurricane risk in the US state of Florida) found that direct insurers have not always passed on discounts to policyholders as some insurers simply divided the cost of the premium that they paid for the reinsurance equally across all policyholders (Medders and Nicholson, 2018[142]).
← 99. For example, policyholders in a county and group of municipalities in the state of Florida had premium discounts of 25% withdrawn because the local authorities had not implemented a requirement to ensure that homes that were more than 50% damaged were elevated during reconstruction (Insurance Journal, 2024[151]).
← 100. One recent study found that USD 11.4 billion in flood damage reductions between 1998 and 2020 could be attributed to actions taken under the Community Rating System, compared to approximately USD 12.1 billion in premium reductions granted (Gourevitch and Pinter, 2023[155]).
← 101. In France, 12% of the premium surcharge applied to property and motor vehicle damage polices were previously allocated directly to a national prevention fund (fonds de prévention des risques naturels majeurs) that supported property- and community-level risk reduction investments. This arrangement was modified in 2021 and the prevention fund is now funded by an annual budget allocation.