Flood Mitigation: A Necessity as Climate Change Intensifies

Climate Change and Flood Damage

A recent study by Stanford University researchers has revealed that intensifying rainfall fueled by climate change over the past 30 years has caused nearly $75 billion in flood damage in the United States. The findings, published in the journal Proceedings of the National Academy of Sciences, highlight the growing costs of flooding and the heightened risk faced by homeowners, builders, banks, and insurers as the planet warms. Losses resulting from worsening extreme rains comprised nearly one-third of the total financial cost from flooding in the U.S. between 1988 and 2017.

Flood Protection Gap

About 90 percent of natural disasters in the United States involve flooding, and much has been written about the flood protection gap. According to the Risk Management and Decision Processes Center of the Wharton School at the University of Pennsylvania, only 30 percent of homes in the highest risk areas have flood coverage. Less than 25 percent of the buildings flooded by Hurricanes Harvey, Sandy, and Irma had insurance. A recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods, identifying around 1.7 times the number of properties as having substantial risk compared with FEMA flood designation.

Private Flood Insurance Market

Flood coverage isn’t included in most homeowners insurance policies, so many may not know they don’t have it if their bank didn’t require them to buy it before providing a mortgage. Until recently, flood insurance was considered an untouchable risk for private insurers to write, so FEMA’s National Flood Insurance Program (NFIP) was the only game in town. However, in recent years, Congress adopted new laws to support the emergence of a robust domestic private flood insurance market. Last year, regulators provided rules that allowed private carriers to offer flood policies outside of NFIP and to qualify for the mortgage flood insurance requirement. Carriers and reinsurers are expanding their use of sophisticated models to underwrite flood risk, driving the growth of private sector flood insurance.

For those living in flood-prone areas, it is crucial to understand the risks and ensure adequate insurance coverage. Consider purchasing flood insurance even if it is not required by your mortgage lender. Stay informed about the latest developments in flood insurance and be proactive in protecting your property from potential flood damage.