Provide better incentives to reduce risk.
We found very few incentives that would induce individuals orbusinesses to invest to reduce flood risk. Our research suggests that insurers could play an influential role inincentivizing risk reduction. There are several potential way this could be achieved, including coverage limits,deductibles and basing insurance premiums on risk. Incentives to increase cover could also be cost-effectivefor the German government. Policy needs to be explicit about how much government assistance should beexpected (and feasible) if those receiving state funds after a flood have no private insurance. Banks and lendersalso can play a role here, by providing incentives to buy private natural hazards cover.Tax incentives and construction regulations could be enhanced to encourage risk reduction. We also identifiedcertain contradictions in regulations that should be addressed. For example, building laws regulating the height of structures limit the extent to which the ground floor of a structure can be raised to protect against flooding.