Ecocentric

The Costs of Climate Change and Extreme Weather Are Passing the High-Water Mark

Hurricane Sandy made it clear: as the climate warms, population grows and sea level rises, extreme weather will hurt more. That's why we need to fix flood insurance

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Scott Eells/Bloomberg via Getty Images

A truck is stuck outside the flooded Battery Tunnel in New York City on Nov. 1, 2012, in the wake of Hurricane Sandy

Hurricane Sandy cost the U.S. some $70 billion in direct damages and lost economic output. This is, obviously, a lot of money — Sandy was the second most expensive hurricane in U.S. history after a small tropical storm called Katrina. Much of that cost was borne by the government — local, state and federal — and some of it was absorbed by those of us who lived in the storm’s path. But about $20 billion to $25 billion of the damage from the storm was eventually covered by the insurance industry. Much of that bill in turn was covered by the big reinsurers, the companies that take on insurance policies from primary insurance companies looking to spread out their risk. And if you were an insurance company affected by Sandy, you better hope you had a reinsurer behind you.

One of the biggest of the reinsurers is Swiss Re, and yesterday I had a chance to talk with the CEO of Swiss Re Americas, J. Eric Smith. Smith was in New York City to speak at an event for the Climate Group, an international nonprofit that works with companies, cities and states on sustainability. The event was held at the NASDAQ headquarters in Times Square, where the temperature threatened to push past 100°F. Global warming was on everyone’s mind, even though the air-conditioning inside was on full and shades blocked out the droning city sun. “What keeps us up at night is climate change,” Smith said. “We see the long-term effect of climate change on society, and it really frightens us.”

(MORE: An Eco-Friendly Solution to Coastal Hazards)

Heat waves alone, though unpleasant, aren’t foremost on Smith’s mind. Instead it’s the more direct risk — to insurers and the public — of bigger and badder storms, compounded by rising seas. Even putting the effect of climate change on storms aside — though recent research suggests that warming could indeed intensify tropical storms — more people and more property are moving into flood-prone areas. As of 2003, 153 million Americans lived in coastal counties — an increase of 33 million since 1980— and 3.7 million lived within a few feet of high tide. The cost of the storms and the damage and destruction that follows will grow, unless we can create a much more resilient society.

Usually that’s taken to mean building a tougher electrical grid, or improving weather forecasting to more precisely track brewing storms. But as Smith made clear yesterday, it will also mean changing how we insure those who live in high-risk, flood-prone areas. Since 1968, the federal government has taken the responsibility of insuring those communities that are most at risk from flooding. More than 5.5 million homes are protected via the National Flood Insurance Program (NFIP), and a little less than 20% of those homes — usually those who live in the most dangerous areas — receive flood insurance at heavily subsidized rates. The result is a perverse incentive for homeowners to continue to live in areas that are likely to be hit by storms and floods, knowing that the cost of rebuilding will be effectively socialized by the rest of us. At a time when we should be seriously thinking about retreating from the most high-risk coastal areas, government policy inadvertently supports living on top of the sea.

Smith thinks that needs to change. “The program that exists today is not fundamentally sound,” he said. The NFIP is expected to go $25 billion to $30 billion in debt after it fulfills claims from Sandy, and both climate change and population growth will put further pressure on the program. A report released last month by the Federal Emergency Management Agency found that by the end of the century, NFIP could have to insure 80% more properties than it does today, and the average loss on each property could rise by as much as 90%. Keeping up a system that provides subsidized flood insurance for those who live in the riskiest areas is barely doable now — if those risks increase thanks to sea-level rise, it will be impossible. “To keep risks manageable and therefore insurable, all of us need to get serious about broad-scale financial solutions to this crisis,” said Smith.

(MORE: Climate Change Could Make Hurricanes Stronger — and More Frequent)

Change is likely on the way. In 2012, before Sandy hit, Congress passed the Biggert-Waters Flood Insurance Reform Act. That law will require those households receiving subsidized flood insurance via NFIP to pay large premium increases of about 25% per year over the next five years. It also directs FEMA to draw up new flood maps and phase in increases for homes in newly designated higher-risk flood zones over the next four years. That will be painful for many — and indeed, a major battle is brewing in Congress over the implementation of the law, with Senator Mary Landrieu of Louisiana, a state that gets more from NFIP than any other, revealing that her 2014 Homeland Security spending bill will include a policy rider that delays the increases in flood-insurance premiums for a year. But protecting those in the highest-risk flood areas will raise the rates on those who live in comparatively safer territory — which isn’t fair — and will continue essentially promoting development on the very coastal areas that will become increasingly vulnerable as the climate warms and the sea rises.

“The current setup is unstable,” said Smith. The change “will help homeowners understand the true risk that national disaster poses to homes and possessions.” We can’t afford not to listen to the insurers.

MORE: How Green Is My Valley? New Satellite Imagery Shows Changes in Earth’s Vegetation

29 comments
petergrynch
petergrynch

Floods cost money. Hurricanes cost money. Wasting MORE money on Obama's "magic thermostat" which the Times claims will tame all climate and make the Earth a Garden of Eden will cost more than all the damage caused by weather in the world. And, of course, it will be exactly as effective as hiring a troop of rain dancers to end a drout.

Let's put it to the test: cancel your subscription to Time Magazine and use the money you free up to buy carbon credits from Al Gore. If that fixes the problem, we will be able to say, "Well that was money well spent!"

polarcityman
polarcityman

Bryan, this is not about insurance or money! THis is why we cannot afford to not listen to the cli fi novelists and screen writers who are warning us to stop use of co2 and coal right now, like yesterday. Stop pretending MR TIME MAGAZINE POSTER BOY@!

MoolbLeinad
MoolbLeinad

Bryan, later in year or early 2014 TIME mag cover story on CLI FI since ....

Hurricane Sandy made it clear: as the climate warms, population grows and sea level rises, extreme weather will hurt more. That's why we need CLI FI novels by Nathaniel Rich and Barbara Kingsolver etc to raise awareness of where we are headed. see NPR and Guardian pieces on CLI Fi and nEW yorker mag too. and blog titled CLI FI CENTRAL....cover story TIME?
Read more: http://pcillu101.blogspot.com

TroyOwen
TroyOwen

@MoolbLeinad  So science isn't real?

How did you get on this post? Science did that.

The New Yorker and the Guardian are just wonderful science magazines aren't they! 

Or should you be looking at the NASA site?

tomcurrie55
tomcurrie55

Keep grasping for straws. The cult of global warming is officially dead.

MikeKelter
MikeKelter

Frank Nutter, President of the Reinsurance Association of America, spoke in front of the Barbara Boxer's Senate Committee  on Environment and Public Works today.  The RAA is the trade association for companies like Swiss RE.    If you look carefully at Mr. Nutter's testimony, which I link below, you come away with a different perspective on insurance than what Bryan Walsh would have you believe.

http://www.epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=f86b767e-7a71-48b4-8eef-7bd9ad1d3884

Mr. Nutter points out the insurance risk arising from population shifts to areas of high weather risk--e.g. coastal areas.  On page 16 of the written testimony, Nutter ranked the 12 largest hurricanes to hit the US since the Galveston storm of 1900 based on IF THEY HIT THE US TODAY.  In this ranking, Katrina came in as the 7th most expensive storm, and Sandy finishes as the 12th most expensive storm.  The four most expensive storms occurred before 1947, if they had occurred during coastal conditions as they exist  today.  

In a study on Climate Change Impacts conducted for FEMA by AECOM--a study frequently cited by RAA members--AECOM concluded that the typical 100 year floodplain nationally would grow by 45% and by 55% in coastal areas (with significant regional variations and assuming a fixed shoreline). Notably the report attributed 70 percent of the projected growth in 100 year floodplains to climate change and 30 percent to expected population growth (the analysis assumes 4 feet of sea level rise by the year 2100).

The four-foot sea level rise assumption looks highly improbable given the current rate of rise is less than 1 foot every 100 years:

http://www.climate4you.com/images/UnivColorado%20MeanSeaLevelSince1992%20With1yrRunningAverage.gif

I agree that insurance requirements for people living in flood-prone areas needs to change.  The National Flood Insurance Program subsidizes people foolish enough to build in these areas in the first place.  



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coloradobob1
coloradobob1

Alberta flood insurers forced to respond to angry 'name and shame' public backlash

Insurance providers who reversed their decision to deny Calgary residents flooding claims after last month’s weather catastrophe may have found their brands were worth more than the water damage.

Several large property and casualty insurers faced a customer backlash in the weeks following the flooding that ravaged Southern Alberta, as neighbouring homes with various insurance providers received different levels of coverage for repairs. Some customers were flatly denied any insurance compensation.

http://www.theglobeandmail.com/news/national/insurers-seek-to-quell-pr-headache-after-alberta-floods/article13241484/

coloradobob1
coloradobob1

In a process that's bound to be watched in other flood-prone parts of Canada, the Alberta government has outlined its new rules for building and rebuilding in high-risk flood zones.

The catastrophic, costly inundation of Calgary, High River and Canmore last month spurred Alberta's Conservative government into action after ignoring the threat for years.

The bottom line: Those who chose to rebuild in a zone designated as a floodway — where water flows would be deep and fast — are on their own when the next deluge hits. They will not be eligible again for compensation from the province's Disaster Recovery Fund, CBC News reported.

http://ca.news.yahoo.com/blogs/dailybrew/flooded-alberta-homeowners-own-rebuild-high-risk-areas-194307866.html

roger.g.foster
roger.g.foster

Here's a little bit of 'inconvenient truth' for all you climate alarmists:EVERY MODEL USED BY THE IPCC HAS OVERESTIMATED WARMING!Here's a rather shocking chart showing all models compared to actual results:http://wattsupwiththat.com/2013/06/06/climate-modeling-epic-fail-spencer-the-day-of-reckoning-has-arrived/As far as superstorm Sandy goes... It was caused by a massive COLD FRONT meeting a warm front.... Not global warming... Oops: Climate change... Oops: extreme weather...AGW will go down as the largest fraud ever, just ahead of evolution!

TroyOwen
TroyOwen

@roger.g.foster

One characterisation of the IPCC is that it is politically motivated to exaggerate the dangers of global warming and the level of human influence on climate change. When IPCC predictions are compared to observed data, the opposite is shown to be the case.

Brysse et al. (2012) suggests that the IPCC and climate scientists in general tend to be too conservative in their predictions because they are "erring on the side of least drama" (ESLD).However, they point out that an under prediction is just as wrong as an over prediction.  Climate scientists may be introducing bias into their predictions for fear of being called "alarmist," but this conservative bias may leave us unprepared for the magnitude of future climate change.

For example, the acceleration in fossil fuel CO2 emissions is tracking the worst case scenarios used by the IPCC AR4 (Copenhagen Diagnosis 2009). Consequently, atmospheric CO2 is increasing ten times faster than any rate detected in ice core data over the last 22,000 years.

coloradobob1
coloradobob1 like.author.displayName 1 Like

@roger.g.foster

June 2013: Smokin’ Hot Globally

For the globe overall, last month turned out to be the second warmest June on record, data from NASA’s Goddard Institute for Space Studies show.

June of 1998, an intense El Nino year, retains the title for the hottest such month since record keeping began in 1880. 

Another noteworthy detail from the U.S. report: “On a local basis, over three times as many record warm highs and lows occurred than record cold highs and lows.”

http://blogs.discovermagazine.com/imageo/2013/07/15/june-2013-second-hottest-on-record-globally/

roger.g.foster
roger.g.foster

1998-hottest year on record!

Hey, wasn't Mann's hockey stick graph predicting runaway global warming by now? Should the hottest year on record be 15 years ago? After all, Michael Mann himself said that the IPCC models would be in serious jeopardy if we ever had 15 years of non-warming... Which we have now had.

Btw, the Mideval warming period and the Holicene era were both much warmer than now... Before fossil fuels.

Also... Rather convenient that 1880 was the starting point for recorded temperature, huh?

TroyOwen
TroyOwen

@roger.g.foster

The planet has continued to accumulate heat since 1998 - global warming is still happening. Nevertheless, surface temperatures show much internal variability due to heat exchange between the ocean and atmosphere. 1998 was an unusually hot year due to a strong El Nino.

While the Medieval Warm Period saw unusually warm temperatures in some regions, globally the planet was cooler than current conditions. 

allenwoll
allenwoll

.

Why not LOWER the risk with better -- and mandatory -- building design and construction practices ? ? 

.

99mystic99
99mystic99 like.author.displayName like.author.displayName 2 Like

This is an inverse incentive system. Those living in the least threatened areas should receive the lowest rates and highest subsidies, but it's currently the other way around. In reality, why subsidize insurance at all? If you want to take a chance and live in a high-risk area, then pay the price and cover the risk yourself. Too much government subsidy, this should be a local control issue where zoning and building codes discourage or prohibit this type of development.

cinematika
cinematika

@99mystic99 True and true, but we are too deep into it. Our economy in Florida is intimately tied to the fortunes of subsidized insurance and unsustainable coastal development. If subsidized insurance ceased to exist overnight, what would we do with our homes that became worthless because insurance costs became higher than the principal and interest of our mortgages? Where would we go? We need to come up with an affordable and practical exit strategy for those of us who naively invested in a house "built on sand." To those who think Climate Change is a hoax, let them suffer the consequences of their own ignorance, but there are millions of individuals who plainly do not know better because they are not being educated about the current slow motion disaster. If you buy a house here and the street floods every time there is a high tide, rain and strong easterly winds (Like in Oakland Park, north of Fort Lauderdale), tough luck. Realtors, appraisers, sellers or insurance companies do not have to tell you about the "new normal" afflicting the neighborhood. So, what is your plan?

cmjen
cmjen

@cinematika I think the point you raise ("We need to come up with an affordable and practical exit strategy for those of us who naively invested in a house "built on sand." ) is really good. I think sometimes people realize change is needed but are unclear how to enact change when the system has yet to reflect new realities/perceptions. Do you think that reinsurance can play a role in moving systems forward?

Full disclosure - I'm a new joiner at Swiss Re (opinions shared here are my own ;-) and am still learning a lot about the industry and issues. I'd be interested to know what you think might facilitate development and implementation of solutions to help homeowners in vulnerable locations mitigate risk - financial or otherwise. Here's one view on our Open Minds blog:

https://openminds.swissre.com/story/273/solutions-in-the-city

nicolasuribestanko
nicolasuribestanko

 "— of bigger and badder storms," So, badder is now standard English????

JackWolf
JackWolf

Frankly I doubt that insurance will hold back climate changes' cost to society.  It may work for a while, but she is just now cranking up and the changes will compound into greater changes so long as there are green house gas emissions. 

Furthermore, if it happened before, it will happen again.  But bigger and more often.

Here is a video by an engineering prof at Illinois Inst. of Tech who outlines a 50 year plan for surviving climate change as presented at a conference in Canada. No, it's not a survivalist video, but a video to help the general public to survive.  It addresses financial planning and reviews different timescales of change in addition to personal safety tips.

http://www.youtube.com/watch?v=SODaBMEJ2xQ&list=LLNgRohjTZJpbm94H1bKo6vw

It provides information that the government should be providing, but isn't.  And when viewing the video, remember, everyone hedges, including and especially scientists and professors. 

cinematika
cinematika like.author.displayName 1 Like

Well Mr. Walsh, the US is again last among developed countries. 

We do not have significant disclosure laws to force insurance companies to publish details about risk assessments and other practices that affect their shareholders and clients  On the other hand, Europeans have very strong regulation in place. European insurance companies publicize, educate and prepare for climate change events. Swiss RE and many others go beyond their disclosure obligation and make great effort to educate shareholders and clients about buying a house or starting a business in high risk areas.

Few are aware that here in Florida all forms of property and casualty insurance are subsidized. Since House Bill No. 89-B, which was introduced on May 27, 1993 and passed by our honorable legislators, insurance companies cannot raise rates, nor stop doing business in the state. In essence; private companies subsidize policies by state dictate. Most Property and Casualty Insurance companies are underfunded and will be unable to cover insured premiums should a major weather event hit Florida.

Citizens Insurance came to be about ten years ago to cover new high risk developments as 89-B did not oblige private insurance companies to underwrite new business. There was a need to facilitate the construction boom in expensive high risk areas near the water. Citizens Insurance is very exposed. SB1770 failed to raise premiums this year to cover two million high risk policies worth almost one five hundred billion dollars. So, the future disaster recovery mess is real and predictable.

I hope my fellow Americans wake up and smell the storm brewing.


Read more: http://science.time.com/2013/07/17/the-costs-of-climate-change-and-extreme-weather-are-passing-the-high-water-mark/#ixzz2ZJAiqs6t

DavidNutzuki
DavidNutzuki

Climate Change was;
A: An unstoppable tiny little cataclysmic climate crisis?
B: An exciting research opportunity for lab coat consultants?
C: A political promise of nicer and colder weather using your money?
D: A lazy copy and paste news editor's w%t dream come true?
E: The new Reefer Madness?
Add Your Own:
F:
G:
H:
I:
J:

LeslieGraham
LeslieGraham like.author.displayName like.author.displayName 2 Like

@DavidNutzuki

'DavidNutzuki' is a well known astro-turfer..
He spams the same off topic gish gallops of the most absurd nonsense to any and every publication and blog that includes the word "climate" in the header.

He posts to about 40 threads under around 5 or 6 different screen-names and his total number of spam posts under the sceen-name 'mememne69' is nearly 10,000.
His real name is Paul Merrifield and he is a 60 year old loser from Niagra Falls.

It has been explained to him a hundred times that the scientific method deals in the balance of probabilities and not absolutes. If it did then it wouldn't be science.

He usualy just does a 'drive-by' posting and doesn't even attempt to refute the proof that he is posting BS.

I always report him as spam whenever possible.

He often changes his name but he is instantly recognisable from the same old posts week in week out.

Just shows what intelligent people are up against when there exist repulsive individuals who are prepared to threaten ours and our childrens future for his ideological beliefs..
Shamefull.

DavidNutzuki
DavidNutzuki

You just hate any opposing view so get over it.

You and the other remaining fear mongers of climate blame belief wouldn't still be shooting your mouths off like this if there were real legal consequences for uttering your CO2 death threats to billions of helpless children. Neocon-like merchants of fear like you just love to sit back and watch the world burn and your cowardly fear mongering will be regarded in history as a war crime.

Your spewing of needless panic owes us an explanation:

What has to happen for the IPCC to say their crisis is now inevitable not just possible as you cannot provide us with one single IPCC warning that says it WILL happen, only "might" happen and "could" happen etc.

How close to unstoppable warming will science take us before they say their crisis is unavoidable just like their comet hits are.

You don't love the planet, you hate the children you condemn to the greenhouse gas ovens of your exaggerated crisis.

Science gave us pesticides and your problem is that you need something or someone to trust and belief in. Well you found it; you found your trust in hate, fear and fear of the unknown. You are part of a war crime; Climate change belief.