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article imageFinancial risk from flooding in U.S. rising due to climate change

By Karen Graham     Feb 23, 2021 in Environment
Brooklyn - The cost of federal flood insurance will need to increase significantly in much of the country to meet the growing risks of climate change, new data suggests, creating a political headache for the Biden administration.
It is becoming increasingly clear that the climate crisis is having an economic impact around the world. One of the most studied adverse effects of global warming is the increased melting of glaciers and polar ice sheets and the resultant rise in sea levels.
Sea level rise will lead to disastrous consequences for coastal cities in the United States in the coming decades, according to a new report titled "The Cost of Climate" by research and technology nonprofit First Street Foundation.
The National Flood Insurance Program needs to quadruple premiums on high-risk homes in flood plains to reflect the risks homeowners already face, according to the data in the report. And by 2051, the cost of flood damage is expected to increase by 61 percent, or $32 billion, according to the researchers who analyzed the economic impact of underestimated flood risk to properties throughout the U.S, according to ABC News.
On April 1, the Federal Emergency Management Agency (FEMA), which runs the flood program, is set to announce new premiums, using modern flood-modeling techniques that more closely reflect the actual risks facing individual properties, basically, the same thing First Street has done, according to the New York Times.
“If they took a purely risk-based approach, it would look like our numbers,” said Jeremy Porter, head of research and development at First Street and director of the Quantitative Methods in the Social Sciences program at the City University of New York.
Several U.S. agencies, including the Federal Housing Finance Agency and the Federal Reserve Bank of Atlanta, use First Street’s data. However, FEMA has already issued a statement telling people not to assume the new flood insurance premiums - which it calls Risk Rating 2.0 - will match First Street's numbers.
“Any entity claiming that they can provide insight or comparison to the Risk Rating 2.0 initiative, including premium amounts, is misinformed and setting public expectations that are not based in fact,” said David I. Maurstad, who runs the flood insurance program for FEMA.
“FEMA recognizes and shares concerns about flood insurance affordability,” Mr. Maurstad said, adding that rates for some people would fall under the new system and stay the same for others. “The number of policies that will see large annual increases is a minority of all policyholders.”
"Accurate, comprehensive and publicly available" estimates of annual flood damages will be necessary to improve risk management and implement more cost-effective planning to mitigate hazards, according to the research.
But looking at buying a property in a flood-prone area may turn out to be a risk that will only continue to grow as sea levels continue their relentless rise over the next 30 or more years. And while FEMA says any great jumps in premiums can be spread out over a number of years for current homeowners. if that home covered by flood insurance changes owners, the new buyer must pay the full rate right away.
More about Climate change, Rising sea levels, Flooding, insurance costs, $203 billion annually
 
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