Tag Archives: Elias Braunstein

Report quantifies flood risk for residential properties in the U.S.

Despite recent efforts to reform the National Flood Insurance Program (NFIP), most U.S. homeowners do not carry insurance to protect their properties against the risk of flooding. For most homeowners, the purchase of this coverage is mandatory only if they live in certain specified high-risk areas. However, significant risk exists in areas where the purchase of flood insurance is rare. Even in areas where flood coverage is required, data from the NFIP and private flood insurers do not indicate high degrees of coverage. 

Beyond direct damages to property and communities, the flood insurance protection gap could have many downstream financial impacts. Homeowners insurance is integral to protecting the collateral that underpins the U.S. mortgage system. As a result, coverage gaps could create adverse financial exposure to bearers of mortgage risk including mortgagees, insurers, reinsurers, federal underwriting agencies, and bondholders. 

In a new Society of Actuaries report, professionals from Milliman and catastrophe modeling firm KatRisk examine the countrywide residential exposure to flooding and downstream implications including its impact on mortgage default risk. They also consider how flooding may be affected by rising sea levels and evaluate how it could affect the financial health of residential householders.

How can U.S. insurers help the country build a successful climate resilience strategy?

While many consumers may recognize the risk of extreme weather-related events, they don’t yet fully understand what they can do to protect their property from a flood, wildfire, or other catastrophic event. One effect of the growing awareness and discussion regarding climate change is that extreme weather events tend to drive consumers to inform themselves about insurance options. Milliman analysis of Google Trends dating back to 2004 identified an increase in interest for search terms related to catastrophe insurance, with surges of online searches occurring around the time of severe weather events.

According to a December 2018 report by Yale and George Mason Universities, a record number of Americans believe that global warming is real and are increasingly worried about its effect on their lives. In this paper, Milliman’s Nancy Watkins and Elias Braunstein explain in more detail the impact of extreme weather on consumers and how insurers can take advantage of increasing climate change awareness to engage more with the public about climate resilience.

To learn more about climate resilience strategies, click here.