Disaster Insurance (Green Paper)

Government compensation for damage to buildings caused by disasters does not constitute a sustainable concept for tackling future disasters. It amounts to an extreme subsidy for individual home-owners and will result in their failing to take out proper insurance cover ("moral hazard"). The Commission correctly emphasises the advantage of risk-based pricing for disaster insurance. Flat-rate insurance premiums should therefore be rejected. Compulsory insurance should also be rejected because it does not in fact encourage personal responsibility. The bundling of insurance should not be compulsory because it reduces the owners' freedom of choice and often gives rise to cross-subsidisation. Liability insurance for industrial and off-shore companies is appropriate.