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A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe


Risk-based insurance is a commonly proposed and discussed flood risk adaptation mechanism in policy debates across the world such as in the United Kingdom and the United States of America. However, both risk-based premiums and growing risk pose increasing difficulties for insurance to remain affordable. An empirical concept of affordability is required as the affordability of adaption strategies is an important concern for policymakers, yet such a concept is not often examined. Therefore, a robust metric with a commonly acceptable affordability threshold is required. A robust metric allows for a previously normative concept to be quantified in monetary terms, and in this way, the metric is rendered more suitable for integration into public policy debates. This paper investigates the degree to which risk-based flood insurance premiums are unaffordable in Europe. In addition, this paper compares the outcomes generated by three different definitions of unaffordability in order to investigate the most robust definition. In doing so, the residual income definition was found to be the least sensitive to changes in the threshold. While this paper focuses on Europe, the selected definition can be employed elsewhere in the world and across adaption measures in order to develop a common metric for indicating the potential unaffordability problem.

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  1. 1.

    The following climate models are used: GFDL-ESM2M, HadGEM2-ES, IPSL-CM5A-LR, MIROC-ESM-CHEM, and Nor-ESM1-M

  2. 2.

    In particular: 1/2, 1/5, 1/10, 1/20, 1/50, 1/100, 1/250, 1/500, and 1/1000

  3. 3.

    It is assumed that there is a fixed exchange rate of one US dollar being equal to 0.9 Euros. This number was based on the average exchange between the following dates: 1 January 2015–31 December 2016 according to

  4. 4.

    The data can be found at:

  5. 5.

    On average across a nation

  6. 6.

    However, it must be kept in mind that this as an example for investigating a voucher scheme based on the proposals of Kunreuther (2008) rather than unaffordability directly.

  7. 7.

    Information on the 10th decile is missing. However, this is not problematic as these households are the least likely to face issues of unaffordability.

  8. 8.

    The particular Eurostat variable is named ilc_di01 from the EU-SILIC dataset.

  9. 9.

    However, this particular value is highly sensitive as discussed in Section 4.1.

    Fig. 3

    Rates of unaffordability and the rate of change over 2010 and 2080 under the expenditure cap (a), housing cost (b), and residual income (c)

  10. 10.

    The particular Eurostat variable is named ilc_li03

  11. 11.

    The particular Eurostat variable is named tessi166

  12. 12.

    The variable is average rate calculated by the author from the data presented in:


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Hudson, P. A comparison of definitions of affordability for flood risk adaption measures: a case study of current and future risk-based flood insurance premiums in Europe. Mitig Adapt Strateg Glob Change 23, 1019–1038 (2018).

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  • Flood risk
  • Insurance
  • Affordability
  • Climate change
  • Adaptation
  • Public policy