Subsidized Flood Insurance Makes Storm Damage Worse

“The National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency, was created in 1968 to help homeowners in flood-prone areas afford insurance. Federal law requires that mortgaged properties in designated flood hazard areas carry flood insurance, but insurance premiums in oft-flooded areas are significantly more expensive (if they’re even offered at all). The NFIP offers federal backing for policies that private insurers would not otherwise touch or that would be too expensive for most people to afford.”

“providing insurance to an otherwise uninsurable market comes at a price: A 2011 report by the nonpartisan Government Accountability Office (GAO) found that 22 percent of NFIP’s policies were issued at subsidized rates, about 40–45 percent of the cost of an unsubsidized policy. Between 2002 and 2013, the NFIP collected between $11 billion and $17 billion fewer in premiums than the market would have dictated.
As a result of charging premiums below market rate, the NFIP often runs over budget”

“The policies themselves don’t make financial sense. NFIP policy holders are not limited in how many claims they can file or how much money they can receive. As a result, more than 150,000 properties nationwide have flooded multiple times and received NFIP reimbursement each time.”

“An insurance company’s refusal to provide coverage in a high-risk area provides a disincentive to anyone who chooses to live there: When the inevitable happens, you’ll be responsible for the damage yourself.

But when the government assumes the risk on an insurer’s behalf and makes insurance cheaper than the market would dictate, it creates incentives for people to live in dangerous areas more likely to be battered by extreme weather events.

There is evidence that NFIP’s artificially cheaper policies have done exactly that. A 2018 study by Abigail Peralta of Louisiana State University and Jonathan Scott of the University of California, Berkeley, found that after a county joins NFIP, its relative population “increases by 4 to 5 percent” as residents stay in high-risk areas as opposed to moving away.”

“Two decades ago, John Stossel relayed the story of his beach house in the Hamptons, built on the edge of the water and insured for just a few hundred dollars a year through NFIP. It was fully or partially rebuilt multiple times over the years before finally getting washed away in a storm, with taxpayers footing the bill each time.

As the 2023 hurricane season gets underway, it’s high time for Congress to end the NFIP—a program that goes billions of dollars into debt providing subsidies to keep mostly wealthy people living in high-risk areas.”

https://reason.com/2023/08/30/subsidized-flood-insurance-makes-storm-damage-worse/

The flooding in Pakistan is a climate catastrophe with political roots

“In April, cricket-star-turned-pseudo-populist Prime Minister Imran Khan sparked a constitutional crisis when he tried to stave off a vote of no-confidence by dissolving the Pakistani parliament. Eventually, the country’s supreme court ruled that he had acted unconstitutionally, the uproarious no-confidence vote proceeded, and he lost the prime ministership.
Since then, opposition leader Shehbaz Sharif became prime minister and has been presiding over a country hard hit by economic malaise — rising debt, a foreign currency shortage, and record inflation — deepened by the wide-ranging knock-on effects for energy and food insecurity presented by the Ukraine-Russia war.

All the while, the former prime minister has continued to hold political rallies that reinforce his street power. In turn, the government has launched a crackdown on Khan. Most recently, the police issued terrorism charges against him over a speech he delivered earlier this month. The next general election will be held in 2023, but Khan has been calling for early elections. Taken all together, it threatens to send Pakistan into an even more dangerous political phase.”

How are floods and droughts happening at the same time?

“The short answer for why these seemingly opposite things are happening at once is that climate change is making our atmosphere thirstier. Or, in more scientific terms, as the Earth warms, its atmosphere can hold more water vapor. This happens at an exponential rate: The back-of-the-napkin math is that the atmosphere can store about 7 percent more water per degree Celsius of warming, and we’re currently at about 1.2°C above pre-industrial temperatures. The result is an atmosphere that takes longer to get saturated with water, which means fewer rainstorms, but when they do occur, those storms dump more water at once, resulting in floods.

Paradoxically, our changing atmosphere is also a perfect recipe for drought. Higher temperatures mean water evaporates faster, and when it falls, it’s less likely to fall as the snow that has historically fed many of the American West’s rivers and streams. The rain isn’t very helpful either, since lifting a drought requires a combination of snowfall and long, sustained rainy seasons instead of short, extreme bursts.

“Water infrastructure in the West is built around snowpack,” said Noah Diffenbaugh, a climate scientist at Stanford University. “It doesn’t need to be stored in a reservoir if it’s being stored in the snowpack.” Reservoirs have limited capacity, Diffenbaugh pointed out, so if an extreme rainstorm filled a reservoir beyond capacity, that water — which otherwise might have fallen as snow, or over a longer period of time — would have to be released.

Instead, we see a vicious cycle: As the soil and vegetation in drought-prone regions dry up, they become prone to wildfires and less able to retain water, so when extreme rainstorms roll in, they trigger floods and erosion. The heat makes the water dry up before it has any particular impact on the drought, and the erosion makes the soil even less able to retain water, so the next flood becomes ever so slightly worse. We saw this kind of mid-drought flooding just a week before the floods in the Midwest, when monsoon rains swept through Flagstaff, Arizona.”

Schumer Insists on Keeping Beachfront Bailouts for Wealthy Americans’ Vacation Homes

“The National Flood Insurance Program (NFIP) run by the Federal Emergency Management Agency (FEMA) is $20.5 billion in the hole, even after Congress canceled $16 billion in debt in 2017. This financial shortfall is largely because the program does not charge nearly enough in premiums to pay for the flood damage on the properties it insures. For decades, taxpayer bailouts of the NFIP have enabled people to live and build in flood-prone areas instead of bearing the risks themselves.

In order to address this problem, the NFIP has been working on its new Risk Rating 2.0 initiative, with the aim of charging premiums that more accurately reflect the unique flooding risks of individual properties. The agency had planned to release its updated rates later this year.

Not so fast, says Senate Majority Leader Chuck Schumer (D–N.Y.). The senator’s office recently informed FEMA that adjusted premiums could have a “severe impact” on homeowners, and urged Congress and the Biden administration to work together toward “affordable protection” for flood-prone communities.”

“lots of beachfront dwellers in New York (and elsewhere) have been “unfairly” taking advantage of taxpayers. A recent study by the nonprofit research group First Street Foundation calculates that the average estimated annual loss for each of the 4.3 million properties most at risk of flooding is $4,419, whereas NFIP premiums average $981. In other words, their flood insurance premiums would have to increase 4.5 times over their current rates to fairly cover the flooding risks to these properties.”

“as a result of “direct government provision of subsidized insurance, private markets no longer generate price signals regarding the cost of living in severe-weather regions.” Suppressing the true cost of insurance encourages “private parties to (rationally) assume excessive risk, and dump the cost of living in the path of storms on others. Indeed, much of the development of storm-stricken coastal areas is due to insurance subsidies, and would likely not have happened at the same magnitude otherwise.””