Climate change is no longer a distant possibility for the Netherlands. Each passing year brings new records in rainfall, windstorms, hail, and flooding. Insurers, once considered mere responders after the damage is done, are now being called to play a different role. Beyond settling claims, can they help society adapt to the risks of a warming world?
This question is at the heart of growing debates in Dutch climate policy. The country, long a global leader in water management, now faces the rising costs of insured damages that have quietly accumulated over the past two decades. Insurance companies, governments, and housing providers are beginning to realise that resilience cannot be left to engineers and policymakers alone. Financial actors may have more influence than ever before.
The growing toll of extreme weather
Since 2007, the Netherlands has seen billions of euros in insured damages from extreme weather. In 2016, a single hailstorm caused almost 600 million euros in losses. Two years later, storms in 2018 pushed damages towards 900 million euros. These figures represent only insured losses. Uninsured damages, from ruined possessions to mental health impacts, push the real cost much higher.
Researchers and insurers agree that while year-to-year fluctuations remain large, the broader picture is clear. More frequent extremes are producing steadily higher claims. In some cases, the financial risks are spreading faster than adaptation efforts. Rising seas, changing rainfall patterns, and more volatile storms will keep testing a system that was designed for more stable conditions.
Insurance as the last line of defence
In public discussions about climate resilience, insurance is often described as the last resort. It is the fourth or even fifth line of defence, behind prevention, adaptation, and emergency response. Once all other measures have failed, insurance is supposed to offer a financial cushion to help victims recover.
Yet this role is becoming harder to sustain. If damage grows too quickly, insurers may be forced to raise premiums to levels that households and small businesses cannot afford. Entire areas could become uninsurable, leaving communities exposed. The system that once promised security could collapse under the weight of repeated disasters.
This is why insurers are increasingly seen as potential partners in adaptation. They are not just passive payers. Their ability to collect and interpret data, incentivise safer behaviour, and invest in preventive measures makes them part of the solution. The challenge is to align financial interests with long-term climate resilience.
The tools insurers already have
Insurers possess a range of instruments that extend beyond damage payouts. The most visible is the adjustment of premiums. Higher-risk areas or vulnerable properties can be priced differently, sending signals to homeowners and developers. While this tool is often unpopular, it highlights the real cost of inaction.
Information is another resource. Insurers hold detailed data on damages, hazards, and vulnerabilities. Sharing this data with local authorities, housing associations, and citizens can help communities make better choices. For instance, flood risk maps or storm impact models can inform where to build, how to renovate, and when to invest in protective infrastructure.
Some insurers also experiment with active warnings. If heavy rain or storms are forecast, customers receive alerts with guidance on how to secure property or limit exposure. These small interventions can reduce damages at relatively low cost.
Rebuilding is another opportunity. When claims are paid, insurers can encourage or require repairs that make properties more resilient. This could include better roofing, flood-resistant materials, or improved drainage. In this way, recovery becomes a chance to strengthen rather than simply replace what was lost.
Prevention and the free rider problem
Despite these tools, insurers remain cautious. Prevention requires investment, and here they face what economists call the free rider problem. If one insurer spends heavily on resilience measures, other insurers may benefit without contributing. A stronger dike or a climate-proofed neighbourhood reduces risks for everyone, not just one company’s policyholders.
Premiums are another barrier. In the Netherlands, insurance premiums are relatively low compared to the risks faced. This reduces the financial incentive for insurers to invest in costly adaptation programmes. It also limits their capacity to fund large preventive projects without passing on costs to customers.
As a result, insurers often remain reactive. They cover damages, adjust premiums modestly, and provide information, but stop short of systemic investments. Without coordination, the gap between risk and preparedness keeps widening.
Housing, finance, and climate risk
The discussion about insurance cannot be separated from the housing market. The Netherlands already faces a severe housing shortage. Adding climate vulnerability makes the challenge even more complex. If insurers start pricing risks more aggressively, some houses could lose value or even become unsellable.
This creates the threat of stranded housing. Neighbourhoods at higher flood risk could see falling prices, leaving households trapped with mortgages greater than the value of their homes. For banks and housing associations, this poses a serious financial stability concern. The ripple effects could reach far beyond individual households, affecting the broader economy.
This is why collaboration across sectors is essential. Insurers, banks, housing associations, and government regulators need to share information and coordinate strategies. Failing to do so could turn climate risk into a housing and financial crisis.
Food security is one of the most pressing global challenges. If agricultural lands continue to be irrigated with polluted water, the consequences will reverberate across markets, public health systems, and international supply chains. Addressing refinery wastewater pollution is thus not only an environmental necessity but also an economic and geopolitical priority.
Connecting the dots with government
The Dutch government has traditionally taken the lead in water management and disaster prevention. But in the face of accelerating climate risks, public budgets and infrastructure alone are not enough. Private actors like insurers must be integrated into national adaptation strategies.
Some steps are already being taken. Insurers are joining adaptation platforms and engaging in dialogue with ministries and municipalities. Pilot projects test how insurance incentives can encourage property-level adaptation, from installing water barriers to climate-resilient roofing.
Still, the level of integration remains modest. Insurers and public authorities often work in parallel rather than in true partnership. Information sharing is limited, and incentives are not always aligned. For example, municipalities may approve housing developments in areas that insurers consider high-risk, creating conflicting signals for citizens.
The economics of resilience
One of the strongest arguments for involving insurers in climate adaptation is economic. Every euro spent on prevention can save multiple euros in damages. This is well-documented in flood management, storm protection, and wildfire prevention. Yet the benefits are often diffuse and long-term, making it difficult to justify investment in the short term.
Insurers can help change this dynamic by embedding preventive costs into premium structures. If resilience reduces claims, customers who adapt should pay less. This approach rewards proactive behaviour and spreads costs more fairly. Over time, it can shift markets towards safer practices.
However, implementing such models requires political support. Regulators must allow insurers to differentiate premiums based on adaptation measures, and governments may need to subsidise transitions for vulnerable households. Without such policies, insurers risk penalising those who are least able to invest in resilience.
The role of data and digital tools
Digital technologies open new possibilities for climate-aware insurance. High-resolution weather forecasts, satellite imagery, and artificial intelligence can help predict risks and optimise responses. Some insurers already use predictive models to adjust claims management and provide targeted warnings.
If integrated with public systems, these tools could transform how society prepares for extremes. Imagine a national platform where insurers, municipalities, and citizens access real-time climate risk information. Local authorities could mobilise emergency teams, households could take protective measures, and insurers could adjust coverage dynamically.
Such integration would require new governance frameworks, data-sharing agreements, and public trust. But the potential benefits are significant, especially as extremes become more frequent and damaging.
Learning from international examples
The Netherlands is not alone in facing these questions. In countries like Germany and the United States, debates over flood insurance have highlighted the tension between affordability and sustainability. After major floods in 2021, Germany faced billions in damages that exceeded private insurance coverage. In the United States, federal flood insurance programmes have struggled with chronic deficits.
These cases show that without careful design, insurance systems can collapse under climate stress. They also highlight opportunities. In some regions, insurers work closely with governments to co-finance preventive infrastructure. In others, public-private partnerships have created resilience funds that reduce both human suffering and financial losses.
For the Netherlands, with its long tradition of water cooperation, these models could offer inspiration. The question is how quickly insurers and policymakers can adapt lessons to the Dutch context.
A cautious beginning
Despite the challenges, Dutch insurers are starting to move. Industry associations are participating in climate adaptation platforms. Research collaborations with universities explore how financial incentives can support resilience. Some companies are experimenting with pilot schemes that reward households for installing flood defences or improving roofing standards.
These initiatives remain small compared to the scale of the problem. But they represent a shift in mindset. Insurers are beginning to see themselves not only as risk absorbers but as risk managers and even risk preventers. The path forward will require stronger partnerships, clearer incentives, and a willingness to invest in the future.
The road ahead
The rising cost of climate damages in the Netherlands is a warning. Waiting for storms to pass and floods to recede is no longer enough. Insurance systems that were designed for rare disasters are now facing regular extremes. Without change, premiums will rise, households will suffer, and resilience will weaken.
But there is also an opportunity. By sharing data, incentivising adaptation, and investing in prevention, insurers can help society prepare for the climate of the future. Their role may remain a last line of defence, but with the right strategies, it can also become a first step towards resilience.
The central question remains. Will insurers continue to act as passive payers of damage, or will they step forward as active partners in climate adaptation? The answer will shape not only the future of the insurance sector but the resilience of Dutch society itself.
Reference
Kowalski, J. (2025). How to Map the Costs of Inaction?. https://resolver.tudelft.nl/uuid:a832fc37-dc92-4d52-92d1-79c48c1c5f75
