Addressing physical climate risk: the case of flood protection

This article provides a primer on the economic impact of flood risk. We present the more recent findings of the literature on natural disaster, focusing on floods. Then, we implement a simulation exercise, based on the estimates by Fatica et al. (2022), that quantifies the impact of flooding on the performance of European firms for different level of flood protection. Our results highlight the importance of protective measures that reduce the extent of inundated areas as an effective adaptation strategy leading to substantially lower negative impact for firms.