A new report commissioned by the Federal Emergency Management Agency raises the question of whether climate change will make the cost of flood insurance unaffordable for many people by the end of the century.
Unless current trends revealed by the report are not slowed or reversed, people may have to adjust where they live due to the cost of flood insurance, according to Stuart Mathewson, a member of the American Academy of Actuaries' Flood Insurance Subcommittee who has studied flood issues.
It also likely means that the current policy of grandfathering existing rates for many customers affected by changes in flood plains will have to be modified, the actuary adds. Without changes, homes in flood zones could become completely unaffordable.
"The increase in loss cost estimates is significantly impacted by the current 'grandfathering' programs," says the report. "As more policies become grandfathered because of increasing depth in [A zones] grandfathered policies may become a larger portion of the policy base."
"The Impact of Climate Change and Population Growth on the National Flood Insurance Program" predicts that because of climate change, for inland areas, the average increase in both the river depth and the area in the flood plain are expected to increase by 45 percent by 2100. Areas classified as part of a flood plain would increase by over 100 percent for portions of the Gulf of Mexico and the Atlantic coasts, but less than 50 percent along the Pacific Coast.
"This means an 80 to 100 percent increase in the number of homes that go from a B, C or X zone for purposes of flood insurance premium rates to be paid through the National Flood Insurance Program—meaning they will have to pay significantly more," says Mathewson.
"The key issue in getting flood insurance financially viable is that we need wider participation," he says, adding that the academy release a study in 2011, "The National Flood Insurance Program: Past, Present … and Future?"–published with the intent to educate people about the structure of and solvency issues surrounding the flood insurance program.
"This is an affordability issue because people who live in riverine and coastal areas that gradually become more prone to flooding will end up being moved into the A zone" for NFIP premiums, says Mathewson, a property-pricing actuary working for Swiss Re-Corporate Solutions.
"People living in flood-prone areas are likely to be moved and will move. It will be impossible to rebuild in the same places hit with floods, based on the guideline elevations," he continues. And, "there are those who will choose not to rebuild because of the increased frequency of floods."
The FEMA-commissioned report was released against the backdrop of President Obama announcing during an address at Georgetown University numer of climate change-related actions, including a directive for the Environmental Protection Agency to establish carbon emission standards for both new and existing power plants.
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