Why Insurance Companies Are Retreating from Flood-Risk Areas
July 7, 2025 · Frisian News
Major insurers have stopped writing new flood policies in high-risk zones across Europe and North America, leaving homeowners uninsured and governments scrambling for solutions.
Last month, State Farm announced it would no longer renew flood insurance in Louisiana, dropping 13,000 policies in one state alone. Across the Atlantic, European insurers pulled back from coastal regions in the Netherlands, Germany, and Scandinavia. The message from corporate headquarters is blunt: the math no longer works. Storm frequency has jumped 40 percent in two decades, claims have ballooned, and premiums cannot rise fast enough to match the risk.
Insurance companies exist to spread risk across many customers. When too many customers live in the same danger zone, the system breaks. A single major flood event can wipe out years of premium income. Insurers respond by raising prices, and when customers refuse to pay, the companies simply leave. They have no obligation to insure anyone in any location. The market works by abandonment.
Governments now face an ugly choice. Some have created state-run insurance pools to cover the rejected customers, as France and Belgium have done. These pools charge lower premiums than the market would, which means healthy balance sheets sink fast. Other regions impose mandatory insurance through law, forcing companies to stay. The Netherlands tried this and watches its insurers shrink their operations anyway. None of these fixes addresses the core problem: more people live in dangerous places than economic reality can support.
The real culprit sits in zoning and development policy, not in insurance math. Communities built homes and businesses in flood zones for decades because land was cheap and building codes were loose. Insurance companies subsidized this sprawl by offering cheap coverage. Now that the risk has matured into visible losses, the subsidy ends. Towns and cities that allowed construction in wetlands or river deltas now watch their property values crater and their tax bases shrivel.
The withdrawal of insurers will not reverse climate patterns or undo development mistakes. It will instead force a sharp correction in which properties in genuine flood zones lose value and become affordable only to those who accept the risk. This sounds harsh, but it beats the alternative: endless government subsidy of bad choices. Markets work best when they tell the truth about cost.
Foarige moanne kondige State Farm oan gjin oerstreamfersekeringen mear yn Louisiana te ferniuwen, wêrmei 13.000 polissen yn ien steat wurden stopset. Oan 'e oare kant fan 'e Atlantyske Oseaan tûkken Europeeske fersekeraars harren werom út kustgebieten yn Nederland, Dútslân en Skandinaavië. It berjocht fan bedriufshoofkwartieren is dûdlik: de wiskunde giet net op. De stormfrekwinsje is yn twa desennium mei 40 prosint stigjen, skàdeisen binne eksplozyf tanimd, en premies kinne net fluch genôch stije om it risiko by te hâlden.
Fersekeraars besteane om risiko's oer in soad klanten te ferspraaie. Wannear te folle klanten yn deselde gefaarensoene wenje, beswikt it systeem. Ien grutte oerstreamjing kin jierren oan premieinkomsten fuottûke. Fersekeraars reagearre troch prizen te ferheegjen, en wannear klanten wegerje te betelje, goane de bedriuwen gewoan fuort. Se hawwe gjin ferplanting om ininoar earne te fersekearje. De merkt wurket troch ferlitten.
Rjuchtsadministraasjes steane no foar in lelike kies. Somme hawwe statifearsekeringspools opset foar ofwizen klanten, lykas Frankryk en België dien hawwe. Dizze pools berekkene legere premies dan de merkt doen soe, wat betsjuttet dat sûne balânsjes fluch krimpje. Oare gebieden leggje ferplichte fersekering op fia wet, en twingje bedriuwen te bliuwen. Nederland besocht dit en sjocht syn fersekeraars dochs har aktiviteiten ferkleinje. Gjin fan dizze oplosingens lost it kernprobleem op: mear minsken wenje op gefaarlike plakken dan ekonomyske werklichheid ûnderstiune kin.
De echte skuld sit yn romtelike oardering en bouwbelied, net yn fersekeringswiskunde. Gemeenten bouwen huzen en bedriuwen yn oerstreamgebieten yn desennium, om't lân goedkeap wie en bouwkoadeks los wiene. Fersekeraars subsidearje dizze ekspansje troch goedkeape dekking oan te bieden. No it risiko harren yn sichtbere ferliezen omset hat, einigt de subsidje. Stêden dy't bou yn wetlâns of riverdeltas tawurde, sjogge har fêstgoewaarden ynstortje en har belestingbases ferskretsje.
De werom tûke fan fersekeraars sil klimaatpatronen net omkearje of ûntwikkelingsfailen net úndwaande meitsje. It sil yn stee derfan in skerpe korreksje twinggje wêryn eigendommen yn echte oerstreamzoenen oan wearde ferlieze en allinne foar dy dy't it risiko akseptearre betellber wurde. Dit klinkt heard, mar it slagget better dan it alternatyf: endless oerheidsstipe foar ferkearde kiezen. Merken wurkje best wannear se de wierheid fertelle oer kosten.
Published July 7, 2025 · Frisian News · Ljouwert, Fryslân