The Risks of Hazard

FM Global has published the Global Flood Map (or Global FM - fans of palindromes, rejoice). It is a free-to-use flood map that covers most of the world. The flood map is delivered through an easy-to-use portal, and is offered in the spirit of building awareness around flood risk. We here at the Risks of Hazard are excited to see it out there (especially since we like palindromes).

Cap Radio ran a series of stories in March how the state of California is thinking of pulling out of the NFIP. Not only that – they are thinking about forming their own version of the NFIP for the state. Let’s take a look at this imaginative plan to replace a system that doesn’t work very well with a plan that’s…kinda the same.

The thinking is pretty clear for leaving the NFIP – California has paid more in premiums than they’ve received in claims. In other words, they’re the comparative low risk in the risk pool and they are paying the same rates as everyone else in the country. This makes sense in the same way that there are lower risk properties in A zones to offset higher risk properties – the program needs to balance high risk with lower risk. In yet other words, they are cherry picking the NFIP at the state level. Epic cherry-picking!

Last week, a new Senate bill was introduced (by a bipartisan tandem of senators) to reauthorize the NFIP for 10 years, along with a study on flood insurance from the General Accounting Office (GAO). Both documents propose expansion of private flood insurance in the US. When added to the NAIC/CIPR’s flood study  and the “monograph”  (love that term) from the American Academy of Actuaries, the momentum in regulatory circles is clear. We just need something from The Big I to add to the choir.

The Senate bill, as mentioned, is intended to reauthorize the NFIP for another decade, but with significant changes. It does its best to juggle the various mandates the NFIP fulfills (flood plain management, flood risk mitigation, lender support, economic growth, along with flood insurance), and thus presents a bucket list of ambitions. As usual, the imperative on the NFIP to serve so many purposes will ultimately jeopardize its ability to be an effective insurer. However, as long as everyone is OK with this state of affairs and doesn’t expect the NFIP to actually be a solvent insurer of flood risk… whatever. Here is a link to Insurance Journal for a summarized version of the bucket list.

On the same day, the GAO released a study on flood insurance that complements the other studies coming out in April. It is a hefty affair, as one would expect from that august body of bureaucracy, but it is very, very good reading. The thing I like most about reading the GAO study is that it is the latest in a tradition of studies on flood insurance – they refer to their previous reports from decades past, often citing conclusions that have proven to be valid. The other studies are firmly focused on the present and future, while the GAO discusses the future from a durable and decades-long foundation of studies. And what do they say from this position? The same thing as everyone else: there needs to be more private flood insurance. Well, that’s one of their six conclusions, at least:

Last week, the Center for Insurance Policy and Research (the research arm of NAIC) ran a panel discussion on Flood Risk and Insurance in Denver at the NAIC spring meeting. The panel discussion was in tandem with the release of their new study, Flood Risk and Insurance. Both the panel and the study were celebrated as successes in the room – and I’m not saying that just because I was an author of the study. The panel discussion featured a few real highlights for me:

One of the shortcuts that every blogger uses is using a Top 3 list of blogs they’re already written. With the end of the first quarter of 2017, it’s time for Risks of Hazard to shamelessly use that shortcut. Without any ado:

3. Proper Flood Insurance is Coming This post lauded the filed flood rates from Palomar, which is the first set of filed rates NOT based on any NFIP stuff. It was a hit – even with people not working for Palomar.