Jerry Theodorou on Natural Disasters and Insurance

Link:https://www.c-span.org/video/?514314-3/washington-journal-jerry-theodorou-discusses-natural-disasters-insurance

Excerpt: [transcript from closed captioning]

Jerry Theodorou
IT IS HARD TO CALCULATE. THE INSURANCE INDUSTRY WAS FACED WITH MASSIVE FLOOD LOSSES BUT FOUND THAT IT DID NOT HAVE THE DATA TO PRICE IT ACCURATELY. IT STARTED REDUCING AND EXCLUDING FLOOD FROM STANDARD INSURANCE POLICIES AND THE GOVERNMENT STEPPED IN TO CREATE THE PROGRAM. TO PROVIDE SOME LEVEL OF FLOOD INSURANCE. THERE IS AN INHERENT TENSION IN THE PROGRAM BECAUSE IT HAS TWO GOALS IN CONTENTION WITH EACH OTHER. THE GOAL TO PROVIDE AFFORDABLE FLOOD INSURANCE AND SOME DEGREE OF FISCAL SOUNDNESS. THEY ARE PAYING ABOUT $400 BILLION IN INTEREST, WHICH IS A BURDEN, SO IF WE FOCUS STRICTLY ON AFFORDABILITY, YOU WILL HAVE UNDERPRICED INSURANCE, NOT PRICED ACCORDING TO THE ACTUAL VOLUME. THIS IS WHAT IS HAPPENING NOW WITH LARGELY IMPACT — OVERPRICED INSURANCE. FOCUSING ON FISCAL SOUNDNESS, YOU WILL HAVE THOSE EXPOSED. IT IS A LITTLE BIT OF A BALANCE. DO YOU WANT FISCAL SOUNDNESS? PROBABLY A LITTLE BIT OF BOTH, WHICH IS MY NEXT MONTH, OCTOBER 1, THE NEW BEATING WILL BE INTRODUCED TO MAKE IT MAKE THE PRICING AND THE COST OF FLOOD INSURANCE MORE APPROPRIATE FOR THE LEVEL OF RISK. IT IS EITHER OR. IF YOU LIVE IN A FLOOD ZONE, YOU PAY HIGHER PREMIUMS. IT IS NOT BLACK-AND-WHITE BECAUSE THERE IS A SPECTRUM FOR THE DEGREE OF RISK. IT WILL INTRODUCE MORE VARIABLES SO THAT IT IS MORE APPROPRIATELY CORRELATED WITH THE LEVEL OF RISK.

Author(s): Jerry Theodorou, John McArdle

Publication Date: 5 Sept 2021

Publication Site: C-SPAN, Washington Journal

Flood-Threat Assessment Finds Danger Goes Far Beyond U.S. Homes

Link:https://www.bloomberg.com/graphics/2021-flood-risk-critical-infrastructure/

Graphic:

Excerpt:

Nearly a quarter of U.S. critical infrastructure—utilities, airports, police stations and more—is at risk of being inundated by flooding, according to a new report by First Street Foundation, a Brooklyn nonprofit dedicated to making climate risk more visible to the public.

Roughly 14% of Americans’ properties face direct risk from major storms, but the study shows danger extends far from those property lines.

The authors say the report provides the first holistic understanding of flood risk beyond individual property level. In addition to critical infrastructure, the report assesses commercial buildings, millions of miles of roads and socially important institutions such as schools and museums.

“Even if your home is far from the risk of flooding or forest fires, you may not so easily escape the systemic impacts from vulnerable critical infrastructure that sometimes extends hundreds of miles,” said Jesse Keenan, a climate-change and real-estate expert at Tulane University in New Orleans.

Author(s): Leslie Kaufman, Rachael Dottle, Mira Rojanasakul

Publication Date: 11 October 2021

Publication Site: Bloomberg

The flood insurance debate returns. Here’s what to expect

Link: https://www.eenews.net/stories/1063731009

Excerpt:

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.

Author(s): Hannah Northey

Publication Date: 27 April 2021

Publication Site: E&E News

Risk Rating 2.0

Link: https://www.fema.gov/flood-insurance/work-with-nfip/risk-rating

Excerpt:

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.

Date Accessed: 4 March 2021

Publication Site: FEMA