The long-term security of coastal regions depends not simply on climate, oceans and geography, but on multiple local factors, from the politics of foreign aid and investor confidence, to the quality of resilience-oriented designs and ‘managed retreat’.
Take some examples. In 2017, the drought in Cape Town and lack of resilient water infrastructure led to a downgrade by Moody’s. Wildfires in the Trinity Public Utilities District in California led to similar downgrades in 2019. Moody’s have developed a ‘heat map’3 that shows the credit exposure to environmental risk across sectors representing US$74.6 trillion in debt. In the short term, the unregulated utilities and power companies are exposed to ‘elevated risk’. The risks to automobile manufacturers, oil and gas independents and transport companies are growing. Blackrock’s report from April 2019, focused primarily on physical climate risk, showed that securities backed by commercial real estate mortgages could be confronted with losses of up to 3.8 per cent due to storm and flood related cash flow shortages.4 Climate change has already reduced local GDP, with Miami top of the list. The report was amongst the first to link high-level climate risk to location analysis of assets such as plants, property and equipment.
In other words, adaptation and resilience options are also uniquely local. The outcomes hinge on mapping long-term interdependencies to predict physical world changes and explore how core economic and social systems transition to a sustainable world.
Science has provided America with a decent idea of which areas of our country will be most devastated by climate change, and which areas will be most insulated from the worst effects. Unfortunately, it seems that population flows are going in the wrong direction — today’s new Census data shows a nation moving out of the safer areas and into some of the most dangerous places of all.
Some of the examples are genuinely mind-boggling. For instance, upstate New York is considered one of the country’s most insulated regions in the climate crisis — and yet almost all of upstate New York saw population either nearly flat or declining. At the same time, there were big population increases in and around the Texas gulf coast, which is threatened by extreme heat and coastal flooding.
Similarly, the city of Philadelphia is comparatively well situated in the climate crisis — but it saw only modest population growth of 5 percent. It was surpassed on the list of biggest cities by Phoenix, which saw an 11 percent population growth, despite that city facing some of the worst forms of extreme heat and drought in the entire country.
Theoretically, wealthier people should buy less insurance, and should self-insure through saving instead, as insurance entails monitoring costs. Here, we use administrative data for 63,000 individuals and, contrary to theory, find that the wealthier have better life and property insurance coverage. Wealth-related differences in background risk, legal risk, liquidity constraints, financial literacy, and pricing explain only a small fraction of the positive wealth-insurance correlation. This puzzling correlation persists in individual fixed-effects models estimated using 2,500,000 person-month observations. The fact that the less wealthy have less coverage, though intuitively they benefit more from insurance, might increase financial health disparities among households.
The most comprehensive proposal being floated so far is one from House Financial Services Chairwoman Maxine Waters (D-Calif.).
That discussion draft would extend the program for an additional five years and limit the government’s ability to raise the price of flood insurance amid growing concerns about affordability (E&E Daily, April 14). Current authorization for the National Flood Insurance Program (NFIP) is set to expire in five months.
Jerry Theodorou, director of the finance, insurance and trade program at the R Street Institute, said subsidies mask the real costs of building and living in flood-prone areas and that the Peters-Barr bill would ensure that policyholders aren’t “undercharged.”
Theodorou said the Waters bill instead would kick the can down the road, and he criticized the measure for seeking to cancel the program’s historic $20.5 billion debt.
Leave it to California lawmakers, however, to cast aside thousands of years of complex commercial history in a misguided attempt to fix an admittedly legitimate insurance problem. Thanks to Proposition 103, a 1988 ballot measure, California already has a distorted insurance market that gives the insurance commissioner czar-like powers to approve rate increases and impose rate decreases.
Because of that law, insurers have a tough time adjusting rates to manage their risks. It’s a long, cumbersome, and antagonistic government process to adjust rates. Their other lever for ensuring solvency is to reduce their underwriting risks by, say, not writing fire-insurance policies to homeowners who live in high fire-risk areas or car insurance policies to drivers with multiple DUIs.
Instead, California Assemblymember Marc Levine, D-Marin County, has introduced Assembly Bill 1522, which would prohibit insurers from canceling insurance policies solely because a home or business is located in a high-risk wildfire area. It epitomizes California’s economically illiterate edict approach.
This shift will be a welcome change for many employees, especially those who used to have long, arduous commutes. But those who go remote on a full-time basis will incur at least one cost: paying for extra workspace at home. Such expenses are not trivial. A recent working paper by Christopher Stanton and Pratyush Tiwari of Harvard University estimates that, between 2013 and 2017, American renters who worked from home spent roughly 7% more of their incomes on housing than similar workers who commuted to the office. Homeowners who worked remotely spent an extra 9% on their mortgage payments and property taxes.
The National Flood Insurance Program (NFIP) is redesigning its risk rating by leveraging industry best practices and current technology, FEMA will deliver rates that are fair, make sense, are easier to understand and better reflect a property’s unique flood risk. FEMA calls this effort Risk Rating 2.0.
alert – warning Risk Rating 2.0 implementation has been deferred To October 1, 2021.
While the agency initially announced that new rates for all single-family homes would go into effect nationwide on October 1, 2020, some additional time is required to broaden the agency’s analyses of the proposed rating structure across its entire book of business, to include its relationship to communities behind levees. Therefore, FEMA decided to adjust implementation of Risk Rating 2.0 by one year to October 1, 2021.
U.S. property insurers are bracing for claims for damage from collapsing roofs, bursting pipes and lost business as Texas takes stock of its losses from a winter storm that has crippled its electrical grid.
Insurers’ losses could stretch into billions of dollars, said Moody’s analyst Jasper Cooper.
Insurers in Texas, the second-largest property insurance market among U.S. states, are used to grappling with historic storms, such as Hurricane Harvey in 2017.
But this winter storm is unique because of its grip across the state. It crippled the electric grid and left hundreds of thousands of homes without power for four days.
Insurers could suffer record first-quarter catastrophe losses after the historic Texas winter storm, which crippled the state’s electrical grid and caused extensive property damage including collapsed roofs and broken pipes, insurer credit rating agency A.M. Best said on Friday.
The storm occurred during a quarter that is typically the most benign for catastrophe losses, and could become the costliest winter weather event in Texas history, A.M. Best said in a report.
The Texas Department of Insurance plans to collect data from property insurers to assess costs stemming from the crippled electrical grid, roofing collapses, broken pipes and other problems, a spokesman said.