Climate change is expected to increase the frequency and severity of certain natural catastrophes, such as flooding. This is likely to increase the willingness to pay (WTP) for natural catastrophe insurances, even though it is uncertain how large this effect will be. In various countries the public sector offers partial compensation of damage caused by natural catastrophes, which may reduce the need for private insurance coverage and hamper the development of insurance markets. We undertook a stated preference survey using choice modeling with mixed logit estimation methods to examine the effects of climate change and availability of government compensation on the demand for flood insurance by homeowners in the Netherlands. In addition, the dependence of WTP on prior risk perceptions, objective measures of risk, risk aversion, and past insurance purchases is estimated. The study delivers four main insights. First, opportunities for a (partly) private flood insurance market exist under current climate conditions. Second, climate change is expected to increase the proportion of homeowners demanding insurance and their WTP for it, but demand is reduced if premiums are adjusted to reflect increased risk, especially for extreme changes in climate. Third, considerable crowding out of demand occurs when flood damage is partly compensated by the government. Fourth, problems with adverse selection are expected to be minor since perception of risk is an important determinant of demand and not so much objective risk based on geographical characteristics.