income households live close to jobs, this type of insurance will deepen welfare inequalities across income groups compared to a no-flood situation. Whereas low-income households will be better off with risk-based insurance than any other policy in absolute terms, they will lose comparatively to high income groups. In this setting, only subsidized insurance, which taxes all households for flood damage in proportion to their income irrespective of whether they are at risk of floods, would maintain inequality levels constant across income groups. The situation would be reversed in the high income-low income configuration, where high-income households are directly hit by floods. In this case, risk-based insurance would lower inequality levels, while subsidized insurance would increase it, with the poorest effectively subsidizing risky location choices for the richest. These results point to a possible, though not systematic, equity-efficiency trade-off, and in some cases synergies.

The efficiency-inequality trade-offs (or synergies) are made more apparent as flood events are more damaging, either because of increased flood frequencies, increased flood-prone areas, or more intense events, all else equal. This result is relevant in the context of climate change (Hirabayashi et al. 2013). So, while the inequality impacts of flood management policies may appear as negligible for current climate conditions, they could prove much larger in the future. Considering the inertia displayed by structures and urban areas, and assuming that inequality levels can reach unsustainable levels from moral or political perspectives, irrespective of absolute welfare levels of each income group, it is important to take them into account today to avoid future widening of inequalities.

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