As one of the important topics, we have focussed on the role of insurance and the ecosystems and nature-based solutions for DRR. Ecosystems can provide means to mitigate natural hazard risks, by mediation of flows and nuisances; or through maintenance of physical, chemical, biological conditions in the face of pressures. Ecosystem services for disaster risk reduction are most frequently associated with mass stabilisation, water flow regulation especially flood control, wind dissipation, and (micro- and regional) temperature regulation. Other, equally important hazard mitigating services include control of pest, disease and alien species; water filtration; dilution and detoxication of hazardous substances. Compared to engineered or built solutions, ecosystem-based approaches may be cost-effective, have certain co-benefits, and may become increasingly valuable in the face of more frequent and/or severe extreme events. They have an economic value in the context of natural disaster risk reduction and insurance, even if no price actually is paid for their provision and/or maintenance.
Ecosystem services are often ‘taken for granted’ in risk assessments. But many changes to ecosystems, for example to increase agricultural production or to provide land for infrastructure development (buildings, railways, roads...) may have the unintended consequence of reducing these regulating functions, potentially leading to growing societal vulnerability and susceptibility to harm that is expensive and/or difficult to reverse. The combination of increasing intensity and frequency of natural hazards, continuing conversion, homogenisation and simplification of (semi-)natural ecosystems, and the increasing footprint of built infrastructure may be contributing to the observed rapid increase in the costs and damage from natural hazards. It appears sensible to harness insurance and other financial instruments to protect or restore risk-mitigating ecosystem services. In theory, the recognition of ecosystem services could motivate insurers and other stakeholders to protect or restore the ecosystems. However, the combination of financial risk transfer mechanisms and ecosystem restoration is not straightforward because of the widely variable funding habits and traditions that cut across public and private sectors. Many conceptual, legal and financial barriers exist. Where insurance is primarily offered to individuals, such as farmers and homeowners, there is limited scope for using insurance (for example through risk pricing) to incentivise behaviour change. The example of flood insurance, and efforts to motivate property level protection and resilience-building, amply illustrate the challenges. Marginal ecosystem improvements may not be enough to substantially reduce hazard risk. Purposeful ecosystem service provision often requires management intervention at the landscape scale, rather than the individual property. The return on investment may take decades to be profitable. And because ecosystem services are public goods, the cumulative effects generated through insurance-based incentives will also benefit uninsured proprietors. Collective insurance schemes appear better equipped to deliver sizeable improvements of ecosystem services and to get around concerns about free-riding. But collective insurance implies a dominant position or a (quasi-) monopoly of a local insurance market that undermines competition and demands close public control. An example of collective insurance reward under state-subsidised insurance scheme is the Community Rating System (CRS) under the US National Flood Insurance Program (NFIP), where households receive a premium discount if their com- munity takes specified flood mitigation measures. These can include nature-based solutions. Financial incentives through risk pricing are not the only way of harnessing the latent potential of disaster insurance. Other means, even less explored, include taxation, public procurements and concessions, large-scale investment programs and public-private partnerships (PPPs). Individually or together the ENHANCE team members are committed to analyse the potential for cost-effective investments in protecting, enhancing or restoring ecosystems by developing and applying methodologies for estimating the ‘insurance value of ecosystems’, exploring ways in which insurance and public policy instruments can incentivise cost-effective investments in ecosystem maintenance and restoration, and assessing the legal, economic, social and institutional feasibility of insurance and other financial and economic instruments for promoting cost-effective investments in protecting, enhancing or restoring ecosystems.