Are Markets for Natural Disaster Insurance Adversely Selected? Evidence from the National Flood Insurance Program

2021 ◽  
Author(s):  
Patrick Schwarz
Keyword(s):  
Natural Disaster ◽  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Disaster Insurance ◽  
Insurance Program

scholarly journals Catastrophe Economics: The National Flood Insurance Program

2010 ◽  
Vol 24 (4) ◽  
pp. 165-186 ◽  
Author(s):  
Erwann O Michel-Kerjan
Keyword(s):  
Hurricane Katrina ◽  
Private Insurance ◽  
The United States ◽  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Disaster Insurance ◽  
Insurance Program ◽  
Hurricane Season ◽  
Administrative Expenses ◽  
Financial Balance

Hurricane Betsy, which hit Louisiana September 9, 1965, was one of the most intense, deadly, and costly storms ever to make landfall in the United States: it killed 76 people in Louisiana and caused $1.5 billion in damage—equal to nearly $10 billion in 2010 dollars. In 1965, no flood insurance was available, so victims had to rely on friends and family, charities, or federal relief. After that catastrophe, the U.S. government established a new program in 1968—the National Flood Insurance Program (NFIP)—to make flood insurance widely available. Now, after more than 40 years of operation, the NFIP is today one of the longest standing government-run disaster insurance programs in the world. In this paper, I present an overview of the 40 years of operation of the National Flood Insurance Program, starting with how and why it was created and how it has evolved to now cover $1.23 trillion in assets. I analyze the financial balance of the NFIP between 1969 and 2008. Excluding the 2005 hurricane season (which included Hurricane Katrina) as an outlier, policyholders have paid nearly $11 billion more in premiums than they have received in claim reimbursements over that period. However, the program has spent an average of 40 percent of all collected premiums on administrative expenses, more than three quarters of which were paid to private insurance intermediaries who sell and manage flood insurance policies on behalf of the federal government but do not bear any risk. I present challenges the NFIP faces today and propose ways those challenges might be overcome through innovative modifications.

Does the National Flood Insurance Program Have Redistributional Effects?

2017 ◽  
Vol 17 (4) ◽  
Author(s):  
Okmyung Bin ◽  
John Bishop ◽  
Carolyn Kousky
Keyword(s):  
Emergency Management ◽  
Capita Income ◽  
Federal Emergency Management Agency ◽  
Flood Insurance ◽  
Lower Income ◽  
National Flood Insurance Program ◽  
Insurance Policies ◽  
Insurance Program ◽  
Per Capita ◽  
Zip Code

AbstractThis study examines possible redistributional effects of the National Flood Insurance Program (NFIP), using a nationwide database of flood insurance policies and claims between 2001 and 2013 from the Federal Emergency Management Agency. Applying methods from the tax and transfer progressivity literature, we use the departure from per capita income proportionality at the zip code level as our measure of progressivity. Our findings indicate that premiums as a percentage of coverage purchased are regressive: premium shares are larger than income shares for lower-income zip codes. Payouts, however, also as a percentage of coverage purchased, are progressive, meaning lower-income zip codes receive a larger portion of claims paid. Overall net premiums (premiums – payouts) divided by coverage are also regressive. Our findings are driven by certain aspects of the current rate structure of the NFIP, as well as how income is related to risk. We discuss potential policies to provide assistance to lower-income households in purchasing flood insurance.

scholarly journals COASTAL STORM INDUCED EROSION PREDICTIONS FOR FEMA FIS COASTAL HAZARD RISK MAPPING

2018 ◽  
pp. 103
Author(s):  
Christina Lindemer ◽  
Jeffrey Gangai ◽  
Christopher Mack ◽  
Elena Drei-Horgan ◽  
Darryl Hatheway
Keyword(s):  
Emergency Management ◽  
Additional Data ◽  
Flood Insurance ◽  
Coastal Hazard ◽  
National Flood Insurance Program ◽  
Cross Sectional ◽  
Hazard Risk ◽  
Insurance Program ◽  
Erosion Hazards ◽  
Regulations And Guidelines

Flood Insurance Studies (FISs) produced by the Federal Emergency Management Agency (FEMA) per the National Flood Insurance Program (NFIP) regulations and guidelines adopt storm-induced erosion criteria often called the “540 rule”. The methods used in the erosion analysis have been in place since the 1980s. The method requires dunes to be classified as fully eroded, or “removed”, when their cross-sectional reservoir is smaller than 540 square feet. Since the rule’s first application, additional data and recent evidence have become available leading FEMA to identify this approach as an area of the program in need of updating and improvement. Experts involved in conducting coastal hazard analyses for FEMA studies recommend exploring opportunities to improve FEMA guidelines for erosion criterion and revise NFIP regulations and guidance, as needed, to ensure that storm-related erosion hazards are appropriately evaluated and mapped along US coastlines.

The Impact of Climate Change on the National Flood Insurance Program

2012 ◽  
pp. 59-77 ◽  
Author(s):  
David Divoky ◽  
Steve Eberbach ◽  
Mark Crowell
Keyword(s):  
Climate Change ◽  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Impact Of Climate Change ◽  
Insurance Program ◽  
The Impact

Expanding the National Flood Insurance Program to Cover Coastal Erosion Damage

2003 ◽  
Vol 35 (3) ◽  
pp. 639-647 ◽  
Author(s):  
Andrew Keeler ◽  
Warren Kriesel ◽  
Craig Landry
Keyword(s):  
Management Strategies ◽  
Nationwide Survey ◽  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Erosion Damage ◽  
Considerable Uncertainty ◽  
Demand For Insurance ◽  
Insurance Program ◽  
Property Owners ◽  
The Cost

This paper uses the results of a nationwide survey of coastal property owners to estimate the demand for insurance against erosion damage. The National Flood Insurance Program (NFIP) does not technically cover such damage, although in practice there is considerable uncertainty about this point. The ability to insure against such losses has implications for the choice of beach management strategies and for NFIP management. We find significant demand for insurance at prices in the range of current flood insurance premiums, although median willingness to pay appears to be less than the cost of providing such insurance.

Affordability of the National Flood Insurance Program: Application to Charleston County, South Carolina

2016 ◽  
Vol 17 (1) ◽  
pp. 04015020 ◽  
Author(s):  
Wendy Zhao ◽  
Howard Kunreuther ◽  
Jeffrey Czajkowski
Keyword(s):  
South Carolina ◽  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Insurance Program ◽  
Program Application

Update: The National Flood Insurance Program and the Coast

1985 ◽  
Author(s):  
William G. Fry ◽  
Perry A. Rhodes
Keyword(s):  
Flood Insurance ◽  
National Flood Insurance Program ◽  
Insurance Program
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