In a recent term paper for a course in Catastrophic Risks, I explored how flood risk affects real estate markets. Focusing on the French CatNat regime and UK’s FloodRe and their influence on property pricing. Interestingly, the uniform pricing approach in France’s CatNat seems to protect homeowners quite well, leading to smaller price discounts for properties in flood-prone areas compared to the UK.
A critical issue from the public policy point of view is the importance of clearly defining the long-term goals. I believe, France’s CatNat, now over 40 years old, lacks a clear endpoint and will face sustainability challenges as climate risks escalate. On the other hand, the UK’s FloodRe provides an interesting example of interesting public-private policy, protecting current homeowners, especially in less affluent places, while also planning to gradually phase out these protections. Eventually, this approach allows property markets to naturally reflect flood risk and associated costs.
I’m curious to hear your thoughts on this, especially regarding how insurance policies should adapt to climate change. If you’re interested in this topic and want to discuss it further, feel free to reach out. Perhaps we can collaborate to expand this into a proper discussion paper!
The paper is short, but I think it’s a pretty good read. Check it out here!