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The Effects of Subsidized Flood Insurance on Real Estate Markets

Nicola Garbarino (), Benjamin Guin () and Jonathan Lee ()
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Nicola Garbarino: Ludwig Maximilian University of Munich and Ifo Institute for Economic Research
Benjamin Guin: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Jonathan Lee: University of Glasgow

No 995, Bank of England working papers from Bank of England

Abstract: Subsidised insurance against extreme weather events improves its affordability among households in high-risk areas but it can weaken the risk signal via property prices. Leveraging a granular data set of all property transactions and flooding in England, we study the effects of a reinsurance scheme which lowers insurance premiums for at-risk properties. We document that the introduction of this scheme increases prices and transaction volumes of flood-prone properties. This fully offsets the negative direct effects of flooding on property prices, with high-income areas and high-value properties benefiting relatively more. Our findings speak to the debate on transition risk and wealth redistribution in response to public interventions addressing climate change.

Keywords: House prices; flood risk; flood insurance; climate risks (search for similar items in EconPapers)
JEL-codes: G21 Q54 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2022-09-30
New Economics Papers: this item is included in nep-agr, nep-env and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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