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Currently showing: Climate/natural disasters > Climate change

11 Apr 17 13:55

Of all the earth’s perils, flooding is arguably the most vexing. It’s invasive, aggressive and unpredictable. It can be triggered by storm surge, overflowing rivers and excessive rain. What’s more, floodwaters can remain long after the initial event and in some cases materialize post-event with little or no warning.

The US has an annual flood protection gap of around $10 billion and there are many reasons for the current underinsurance problem. Up until now flood has been difficult to model, the spread of risk is inconsistent—leading to adverse selection—and the National Flood Insurance Program (NFIP) is $24.6 billion in debt.

Hurricane Matthew delivered another cruel reminder last year, when it caused $12 billion in losses, of which about $8 billion were uninsured. And that’s not all. The US experienced four separate multi-billion-dollar-loss inland floods, the most in a single year since 1980. That’s 37 years. Think about it!

Swiss Re’s models predict total economic losses from US flooding of $15 billion annually—of which only $5 billion are insured. Clearly, the level of protection hasn’t kept up with exposures; we enable flooding and even allow it to thrive when we build in low lying and coastal areas with no regard for its behavior. We ignore the warning signs, all of which point to increased frequency and severity. According to the latest Swiss Re sigma report:

“scientists expect flood events to become more frequent as rising temperatures load the atmosphere with more vapour, which will translate into more frequent downpours. The combination of population growth, urban development and more extreme weather events as temperatures rise all point to more extreme flood events also, and an increase in the associated costs.”

We also expect more flooding as a result of climate change, particularly in low-lying coastal regions susceptible to rising sea levels. Andy Castaldi, our Head Catastrophe Perils Americas, and I were interviewed for the HBO series VICE, which examined the economic and social costs of climate change.

But things are looking up, as the public and private sectors come together to understand the risk with more granularity, price the coverage equitably and secure necessary funds to ensure faster economic recovery.

For the first time in its history, the NFIP is transferring over $1 billion in risk to the reinsurance markets, giving the federal program a stronger foundation, and just as important, spreading the risk among private sector participants whose balance sheets are made strong by diversification.

The remedies available to us aren’t just financial. It’s human nature to make decisions based on recent events and emotion—to say, “it can’t happen to me”—but we can help reverse those behaviors. We (public and private stakeholders) can help people understand their own risk, present them with simple insurance products and demonstrate how those products are their best protection against future losses. How’s this for a pitch? For $700 a year, you can stay in the area you love, rebuild your home and never lose the quality of life you cherish.

It won’t be long before spring storms will start popping up around the nation, followed by the start of hurricane season. If we don’t want a repeat of 2016 over and over again we need to build on the positive steps taken to date to close the flood protection gap.

*Read our sigma report on natural catastrophes and man-made disasters.
**Watch episode 55 of VICE on HBO.

Category: Climate/natural disasters: Climate change, Disaster risk, Floods/storms, Resilience

Location: Armonk, NY, United States


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