ifo Schnelldienst 11/2021: Extreme Weather Events

Extreme Weather Events: State Aid or Private Provision – Who Bears the Costs?

The floods in Germany in the summer of 2021 robbed many of those affected of their homes and caused billions in economic damage. It is foreseeable that such flood disasters will occur even more frequently in the future as a result of extreme weather events due to climate change. Who should take precautions against natural hazards? Although state aid payments help to cushion the immediate economic consequences of extreme weather events, they can at the same time undermine the incentives for private provision. How could compulsory insurance be designed in an economically sensible way without generating moral hazard behavior? To what extent should the state intervene in the insurance market?

With contributions from:

• Daniel Osberghaus, Government Flood Aid: Necessary in the Short Term, but Not a Sustainable Solution
• Christian Groß and Gert G. Wagner, Compulsory Insurance against Natural Disasters
• Frank Offermann, Christoph Duden, and Jonas Schmitt, Are State-Subsidized Insurance Policies the Answer to Extreme Weather Events? Experiences from the Field of Agriculture
• Michael Berlemann, Growth Effects of Extreme Weather Events
• Jörg Asmussen, Can a Private Insurance Market against Natural Disasters Function?
• Markus Roth, Design of a Mandatory Insurance Against Natural Disasters
• Lamia Messari-Becker, How We Build and Provide Is Central to the Fight Against Weather Extremes
• Nicola Garbarino, Benjamin Guin, and Jonathan Lee, Flood Risk, Financial Products, and Property Prices: What Can We Learn from the UK?