Science

Agreeing on the problem, if not the solution

Despite the very different views of the majority and minority parties in the Senate, there was in fact a fair degree of agreement among the witnesses at today’s hearing on climate science and local adaptation.

During the climate science portion of the Senate Environment and Public Works Committee hearing, both the majority and minority witnesses agreed that the Earth has warmed over the past 120 years. With the recent publication of the Berkeley Earth Surface Temperature project by former skeptic Richard Muller, there are now four (NOAA, NASA and Hadley are the others) major global temperature records that are in agreement that the Earth has warmed 1.5 degrees Fahrenheit over the past 50 years.

Business and government start preparing for climate impacts

Today’s Senate hearing isn’t just about the science of climate change. It’s also about the actions that need to be taken now to adapt to the reality of a changing climate. Businesses and governments each have a critical role to play in building resilient communities and economies.

Business-as-usual is already being interrupted by extreme heat, historic drought, record-setting wildfires, and flooding. Events from water shortages to floods are disrupting the supply chains for such companies as Honda, Toyota, Kraft, Nestle and MillerCoors. By the end of 2011, the United States had recorded more billion-dollar disasters than it did during all of the 1980s, totaling about $55 billion in losses.

Senate gets back to climate science

The Senate Environment and Public Works Committee holds a hearing tomorrow called “Update on the Latest Climate Change Science and Local Adaptation Measures.” This is the first Senate hearing focused directly on climate science in the 112th Congress, and we hope it won’t be the last. Climate change is happening, the news from peer-reviewed science is increasingly daunting, and the public needs to hear what credible scientists are learning about the risks and potential solutions.

Mapping extreme weather across the U.S.

Today we’re updating our online map providing an overview of extreme weather events in the United States since 1990.  The map highlights memorable examples of extreme heat, heavy precipitation, drought, and wildfire, four types of events with clear trends connected to climate change.

Is Global Warming Causing Wild Weather?

I recently responded to a question on the National Journal blog, "Does climate change cause extreme weather like the heat waves much of the country has been enduring for the past few weeks?"

Congress Finally Reforms Flood Insurance

Late last week, in a heartening display of bicameral and bipartisan harmony, Congress passed a bill reauthorizing the National Flood Insurance Program (NFIP) and taking steps to steer it toward solvency. Among those steps is ensuring that climate impact projections are factored into future calculations of flood risk.

A Green Light for Regulating GHGs under the Clean Air Act

In a resounding victory for sound science and policy, the US Court of Appeals decided unanimously this week to uphold both EPA’s finding that greenhouse gases endanger public health and welfare and the agency’s initial set of regulations limiting emissions from vehicles and major new and modified industrial sources.

Given the choice, we’d much prefer to see a new law establishing a comprehensive market-based program to reduce greenhouse gas emissions. But until Congress gets its act together, regulating emissions under the Clean Air Act is really the only option.

Reforming National Flood Insurance Program

With the Senate set to vote today on fixes to the ailing National Flood Insurance Program (NFIP), a new C2ES brief explains why the program is chronically in debt to the U.S. Treasury, and how to make it solvent. We urge, among other things, that Congress allow federal underwriters to begin taking into account rising flood risk due to climate change.

The 44-year-old federally-backed NFIP covers 5.6 million American households and more than $1 trillion in assets in flood-prone areas along rivers and coasts. Flooding is not an easy risk to insure, so historically private insurers chose not to. But in assuming that role, the NFIP has at times served to encourage rather than contain risk, and has racked up $18 billion in debt in the process.

Fixing A Broken National Flood Insurance Program: Risks And Potential Reforms

Fixing A Broken National Flood Insurance Program: Risks And Potential Reforms

June 2012

by Dan Huber

Download the full brief (PDF)

Read the related blog post


The National Flood Insurance Program (NFIP) insures 5.6 million American homeowners and some $1 trillion in assets. For many years, however, the premiums collected have not been sufficient to cover losses, resulting in a current debt to the U.S. Treasury of more than $18 billion. A number of factors, including increased flooding as a result of climate change, are likely to further widen the gap between revenue and risk. Reforms are needed to put the NFIP on the path to solvency and to reduce homeowners’ exposure to chronic and catastrophic flooding risk. Ideally, such reforms should fully account for the increased risks posed by climate change. At a minimum, steps are needed to adjust premiums, improve flood mitigation measures, and prepare for the catastrophic risk of events like Hurricane Katrina. 
 

Introduction

With government budgets still reeling from the effects of the recent recession, and ongoing debates over the future costs of Medicare and Social Security, unfunded public liabilities are of growing concern. The National Flood Insurance Program (NFIP) is one such liability that is often overlooked. The NFIP is already significantly in debt due to premiums that have not reflected the true risk of flood damages. Looking forward, the risk of further losses only increases, as demographic trends place more infrastructure in harm’s way, watersheds are developed and climate change increases flood risk over time.[1]

This paper explores the structural issues underlying the growing gap between flood insurance premiums and actual flood risk. It also examines reforms that can put the program on a more sound financial footing and the incentives needed to reduce the potential costs of future flooding. A report by the American Enterprise Institute found that insurers have “a huge opportunity today to develop creative loss-prevention solutions.” [2] Using both adaptive and financial tools to manage the rising risks posed by climate change will be critical to preventing losses and maintaining the insurability (and therefore property values) of trillions of dollars in at-risk property assets.

Between 1980 and 2005, U.S. insurers paid out a total of $320 billion in weather-related insurance claims.[3] While not all weather-related claims are flood claims, losses from weather events are increasing.[4] Today, the NFIP covers over $1.2 trillion in assets, representing more than a fourfold increase since 1980.[5] If providing this coverage is to remain affordable, Congress must provide FEMA with the tools to accurately price and manage risk.
 

References

1. Kousky and Kunreuther, (2010, March 1). Improving Flood Insurance and Flood-Risk Management: Insights from St. Louis, Missouri. Natural Hazards Review, Vol. 11.

2. Kunreuther and Michel-Kerjan, (2009, January 15). Market and Government Failure in Insuring and Mitigating Natural Catastrophes: How Long-Term Contracts Can Help. Washington D.C., USA: American Enterprise Institute Conference on Private markets and Public Insurance Programs

3. Stephenson, John B., (2007). Financial Risks to Federal and Private Insurers in the Coming Decades Potentially Significant. Washington D.C., USA: United States Government Accountability Office

4. Kunreuther and Michel-Kerjan, Market and Government Failure in Insuring and Mitigating Natural Catastrophes: How Long-Term Contracts Can Help. Op. Cit.

5. Michel-Kerjan, Forges and Kunreuther, (2011). Policy Tenure Under the U.S. National Flood Insurance Program (NFIP). Risk Analysis. 

 

Daniel Huber
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