The disaster in Limburg in July 2021 affected thousands of people. What made it extra tough for many was the compensation process afterwards. This caused a lot of stress and uncertainty. Especially because for a long time it was unclear whether and how much compensation would be paid. Victims also often had to make a lot of phone calls to different counters. In addition, different people and institutions made different assessments of the damage. The solution? A one-stop shop where the government and insurers work together.
This is according to Thijs Endendijk, PhD candidate at the Institute for Environmental Studies at the VU University in Amsterdam. "The thing about flood damage is that compensation can come from both the government and insurers. A victim doesn't really care about this and prefers to have his or her damage compensated as soon as possible. With one central point of contact, you get rid of a lot of noise and insurers and the government can distribute the damage themselves at the back end."
This conclusion follows as a result of Endendijk's previous research into the consequences of the floods in Limburg in July 2021. "I've also done research on harm reduction measures. This showed that measures can reduce the damage by up to 30 to 40 percent. This is a way to continue to build on flood risk management in the Netherlands. In the first instance, we want to prevent flooding, but if this fails, we can reduce the costs."
Thijs Endendijk.
Climate-related risks for the financial sector
In his research, the PhD candidate also looks at the climate risks for the financial sector. "Among other things, I analyse what kind of risks the industry runs due to damage to real estate and what secondary damage is involved. You can think of buildings that are not accessible after a flood and employees who have to work in a different place. It is also possible that there is a business interruption, which in turn leads to a loss of turnover."
Endendijk investigated how long it took for affected organisations in Limburg to be back in full operation. "This depends on how high the water has been. In addition, two other factors play a major role. The first is how quickly there is clarity about compensation and how quickly this money will be received. If, as a company, you still have to wait for a large part of the compensation amount, it will take longer to get back to work. Thus, a streamlined process speeds up recovery. In addition, we also see that companies that have a stronger connection with residents in the area recover faster than organisations with less regional ties. After a flood, residents are more likely to support local entrepreneurs than companies with a less strong connection to the region."
"After a flood, residents are more likely to support local entrepreneurs than companies with a less strong connection to the region"
Distribution of business interruption (left) and lost annual turnover (right) by economic sector after the floods in Limburg in 2021.
Climate services
As the final part of his research, Endendijk takes a closer look at so-called climate services. From 2024, financial service providers will have to report on climate to the EU under the CSRD (Corporate Sustainability Reporting Directive). Central to this is the influence of the industry on the climate and vice versa.
"The problem is that financial institutions such as insurers currently have little or no knowledge about how to map this out. External parties such as reinsurers are often hired for this purpose. In this case, as an organisation, you send in your assets and then they can make an estimate. They have models for this so that they can estimate what the risk is. The problem is that there are many differences between the data providers and that these external agencies do not show how they make the models. A study from Germany, in which the assets of one financial services provider were presented to several external agencies, also showed that there were completely different outcomes. For example, one agency predicted a flood risk and the other did not. These agencies also don't make it clear where the difference comes from, because that's their business model," says Endendijk.
"Within the REACHOUT project in which I am active, we are working on developing a 'standard climate service'. We created a tool for this at the end of 2023; This is a simple way in which data analysts within real estate parties can make their own analysis. The analysts can fill in an Excel file themselves, after which a risk indication will be issued. Pension provider APG has used this tool, as has Real Estate Investment Manager AEW . The tool is online and available to everyone; This is open source and open data. Insurers can certainly use this tool as well."
Cabinet does not want public-private insurance
The government has decided not to insure damage caused by flooding of primary flood defences, the major rivers and lakes such as the Meuse, the IJsselmeer or the sea through public-private insurance. The reason given by the government in the letter to the House of Representatives is that the disadvantages of such an insurance construction do not outweigh its advantages. The government does see a possible role for insurers in claims settlement through the one-stop shop function of insurers.
The Association would have liked to explore the public-private insurance solution further, but certainly sees opportunities in the elaboration of the one-stop shop direction. With this solution, the own insurer is the first point of contact for the consumer. The experienced employees of the (non-life) insurer settle the flood damage from a single point of contact, according to fixed working agreements and in a way that is understandable to a citizen.
The Ministry of Justice and Security, the Ministries of Infrastructure and Water Management and Finance and the Dutch Association of Insurers are now starting a further exploration of the 'one-stop shop' concept.
About Thijs Endendijk
Endendijk will present his work on the effect of damage reduction measures at the European Geosciences Union (EGU) conference.
Thijs Endendijk is a PhD candidate at the Institute for Environmental Studies (IVM) at VU University Amsterdam. He has a background in public administration and economics, with his PhD research now doing in environmental economics. His research focuses on the financial risks of real estate investors due to flooding. He used questionnaires to investigate the impact of the 2021 flood in Limburg and estimated the impact of flood risk on real estate prices. He expects to complete his PhD research in the summer of 2025.
[Story by Christel Dieleman, Image by Thijs Endendijk]
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