New Article – ‘Climate change impacts on pricing long-term flood insurance: A comprehensive study for the Netherlands’

Abstract: Recently long-term flood insurance contracts with a duration of 5, 10 or 15 years have been proposed as a solution for covering flood risk and mitigating increasing flood losses. Establishing a long-term relation between the policyholder and the insurer can provide better incentives to reduce risk through undertaking damage mitigation measures. However, the uncertainty about the development of future flood risk in the face of climate and socio-economic change may complicate insurers’ rate-setting of long-term contracts. This issue has been examined in this study by estimating the effects of these changes on flood risk and pricing flood insurance premiums of short- and long-term flood insurance contracts in all (53) dike-ring areas in the Netherlands. A broad range of simulations with hydrological and flood damage models are used to estimate the future development of flood risk and premiums. In addition, the long-term development of insurance funds is estimated with a spatial “Climate Risk Insurance Model (CRIM)” for a private insurance arrangement and for a ‘three-layered’ public-private insurance program. The estimation of flood insurance premiums of long-term insurance contracts reveals fundamental problems. One is that there is an incentive for either the consumer or the insurer to prefer short-term rather than long-term contracts in the face of climate-related uncertainty. Therefore, it seems advisable to examine the introduction of one-year flood insurance contracts in the Netherlands, at least until the large uncertainties with climate and socio-economic change on flood risk have been resolved. The estimations performed with the Climate Risk Insurance Model indicate that a private insurance fund could have difficulties with building up enough financial reserves to pay for flood damage, while the layered public–private insurance scheme is more robust.

Full Citation: Aerts, J.J.H. and Botzen, W. J. (2011).Climate change impact on pricing long-term flood insurance: A comprehensive study for the Netherlands, Global Environmental Change, 21 (3): 1045-1060 (Available with sunscription from:

‘Competing discourses of energy development: The implications of the Medupi coal-fired power plant in South Africa’

Abstract: This study explores the discursive dynamics behind the controversy to build the US$17.8 billion 4800 MW Medupi coal-fired power plant in South Africa, the seventh largest in the world. It begins by viewing climate change and energy security not as objective fact driven concepts, but constantly negotiated discourses. Based on a sampling of project documents, reports, testimony, and popular articles, the study then maps the discursive justifications behind the project as well as those against it. More specifically, it isolates themes of economic development, environmental sustainability, and energy security that converge into a discursive ensemble of inevitability supporting complete electrification for all of South Africa. The study also documents themes at the heart of the campaign against Medupi: maldevelopment and secrecy, local and global environmental degradation, and energy poverty which coalesce into a grand narrative of democracy. Tracing the intricacies of the Medupi controversy provides rich insight into energy policy and planning in South Africa. It also emphasizes how struggles to expand access to energy services can exacerbate degradation of the environment, and shows how climate and environmental discourses can become institutionalized.

Full Citation: Rafey, W. & Sovacool, B.K. (2011). Competing discourses of energy development: The implication of the Medupi coal-fired power plant in South Africa, Global Environmental Change, 21 (3): 1141-1151 (Available with subscription from:

‘Rethinking South Africa’s Water Security’

Timothy Walker, Institute for Security Studies

It has long been a popular assumption that the major wars and conflicts of the future will be fought over water. This has framed the thinking around which most states and communities around the world, South Africa included, have sought to ensure water security. However, the situation in South Africa is not so dire as one might imagine in lieu of the ‘water wars’ hypothesis, as the opportunities for cooperation and equitable use that exist are greater than realised. Unfortunately, however, the approach that has been taken by South Africa in managing its water, might ironically, lead to greater insecurity at local community levels and turn the hypothesis into a self-fulfilling prophecy.

So far, there appears to be an increasing emphasis in South Africa on augmenting supply or limiting demand, rather than a focus on conservation and usage.

Mike Muller, former director-general of the Department of Water Affairs and Forestry recently speculated that an expansion of the Lesotho Highlands Water Project (LHWP) would ease the insecurity over water in Gauteng. This in itself, places too much emphasis on a project as a cure to water insecurity and fails to confront or interrogate the undergirding values and concepts that have constituted the processes and policies pursued in securing South Africa’s system of water supply. Arguably, great prominence must be placed on the sustainable conservation of water throughout the system, which Muller has also encouragingly emphasised, especially once it reaches cities and urban areas, which is the point at which it is most easily lost.

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New Book – ‘The Future of Insurance Regulation and Supervision—A Global Perspective’

Description: The recent financial crisis has provoked a broad spectrum of regulatory observations and possible responses. Currently most of these proposals have been quick solutions to politically pressing questions and often only address parts of regulatory systems, but not the whole. At times, the result has been more confusion than clarity. Although historically wide-ranging reshaping has been a common phenomenon after the severe failure of an existing financial infrastructure, there is an important difference this time – the global reach of today’s markets and enterprises. Moreover, never before have so many reforms following a banking crisis not only affected the banking sector but also other parts of the financial services sector, such as insurance, the social systems and, of course, our real economy.

Written by leading academics, researchers and insurance industry experts, this book offers a diversified perspective on how the regulatory and supervisory framework for the insurance sector will develop over the coming years. It is supported by The Geneva Association, the world-leading think-tank of the private insurance industry.

Details: Liedtke, P.M. & Monkiewicz, J. (2011). The Future of Insurance Regulation and Supervision – A Global Perspective, Palgrave Macmillan.

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‘Rules of Engagement: Global Regulatory Reforms and the Insurance Industry’

Extract from Editorial: As this editorial for the July 2011 issue of The Geneva Papers on Risk and Insurance—Issues and Practice is written, multiple, massively important regulation initiatives are hitting the insurance industry around the world at the same time. They range from changes in the financial services framework following the lessons from the most recent crisis, to new and more consumer protection initiatives, from further changes to international financial reporting standards to the profound solvency reforms, from modifications of the tax systems to transformations of old-age security arrangements. For any observer of the industry, it has become difficult to follow all of these reforms simultaneously and then trying to understand how they will affect the prospects of the insurance business in the longer term. It is a hallmark of The Geneva Papers on Risk and Insurance—Issues and Practice to discuss those issues that influence the insurance and risk management business in a strategic manner—and the massive regulatory changes in the works right now will change the industry profoundly and to long-lasting effect, which is why we decided to dedicate part of this issue to regulation.

Full Citation: Liedtke, P.M.  (2011). Rules of Engagement: Global Regulatory Reforms and the Insurance Industry, The Geneva Papers on Risk and Insurance—Issues and Practice , 36: 325-329 (Available for download with subscription from:

New Article – ‘South Africa’s Changing Climate’

Abstract: South Africa’s weather records over the past six decades indicate that the region’s climate is shifting. This is evident in small but statistically significant temperature increases in the past half-century. Changes in rainfall patterns are less clear. Nevertheless, responses from the natural environment confirm that conditions are changing, and that these reflect trends elsewhere in the world.

Increases in temperature will continue across the country in the next century, but with regional differences: coastal areas may warm by 3-4°C, and theinterior by 6-7°C. Rainfall patterns will become less predictable in parts, with overall drying conditions in some areas and wetting in other areas; fire conditions will increase in some areas; natural extreme weather events and cycles such as droughts, floods and heatwaves will be amplified in both severity and frequency.

The pressures associated with climatic shifts are anticipated to exacerbate existing environmental, social, developmental and economic vulnerabilities and may roll back many of the advances made in terms of the United Nations Millennium Development Goals. This article discusses anticipated climatic shifts across the region over the next half-century, and highlights the likely impacts for South Africa’s vegetation, landscape and communities, both urban and rural.

Full Citation: Joubert, L. (2011). South Africa’s Changing Climate, Current Allergy & Clinical Immunology, 24 (2): 62-64.

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‘Independent UN expert urges SA to build a food economy to benefit all’

An independent United Nations human rights expert today called on South Africa to build a food economy that is inclusive and benefits all segments of the population, especially the millions who are poor and food insecure.

“South Africa is a champion of institutionalising social, economic and cultural rights such as the human right to food, but it has yet to prove it can deliver results for 12-million poor food insecure people, 70% of which live in rural areas,” Olivier De Schutter, the UN Special Rapporteur on the right to food, said in Pretoria at the end of his official visit.

He praised South Africa for integrating the right to food in its Constitution. “But it is now time to build a food economy that benefits the majority of the population,” he said.

“We must create an inclusive food system for South Africa.”

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