If you’ve watched the news recently, it will come as no surprise that flooding has become a major issue for communities across the United States. In this episode of Critical Point, Milliman consultants Nancy Watkins and John Rollins discuss the history and future of flood insurance. They also explore what flood coverage for homeowners could look like a few decades from now.
The visibility of climate change’s impact on property hazard is increasingly leading individuals and their chosen leaders to ask: how might an increase in hazard affect the desirability of living in various communities and how do we manage the socioeconomic effects? Recent stories have highlighted the concerns of “climate gentrification,” or potential migration from low-lying but relatively well-off areas to areas of higher elevation but sometimes higher poverty.
Milliman has worked with Jupiter Intelligence, a climate risk analytics provider of forward-looking and probabilistic hazard data for future conditions, to develop a framework for analysis that may spark insight for community leaders in the public and private sectors who are charged with managing climate change and planning for a resilient future. This paper by Molly Barth and John Rollins investigates insurance risk, consumer costs, and resilience incentives under the stress of a changing climate in Broward and Miami-Dade counties.
In this AM Best interview, Milliman’s John Rollins discusses the evolution of the private flood insurance market and the challenges to writing private flood insurance. He says that historically the federal government has supplied most of the flood insurance in the United States. But with the private flood insurance market opening up, there is a significant market opportunity for insurers. Roughly 40 million people in the United States need flood insurance, but only about 5 million to 6 million actually buy it. Rollins also talks about the technology involved in writing private flood insurance and how this has changed over the years.
The U.S. private flood insurance industry is an emerging market with the potential for risks and rewards, none as important as helping Americans become more resilient against devastating floods. Several converging developments have transformed the formerly niche offering into a potential sustainable, large-scale business. These developments include rapid advances in technology, an abundance of risk capital, a break in the longstanding legislative status quo, and the human and economic impact of recent disasters on consumer awareness of the increasing flood hazard.
Establishing a greater private flood insurance market should benefit insurance consumers, helping to close the protection gap and improve the resilience of households and economies against future flood-related catastrophes. But as with most great undertakings, hard work and foresight are necessary for success. In this paper, Milliman consultant John Rollins explores some questions and challenges for aspiring U.S. private flood insurers.
Florida is known for its unique level of hurricane exposure, with the majority of its residents making their homes in over 30 counties collectively containing more than 1,000 miles of coastline. After a decade-long and unprecedented lucky streak, the state has now been affected by three major hurricanes in three straight years. Less well-known are some quirky aspects of its political structure that directly influence not only property and flood insurance regulation, but also Florida’s one-of-a-kind government presence within the market.
The public servants who interact most frequently with U.S. insurers are state insurance commissioners. These chief regulators are usually either directly elected or appointed by the state’s governor. But Florida has a “Cabinet” system of government. There are four statewide elected officials—the governor, the chief financial officer, attorney general, and agriculture commissioner—who sit as the Financial Services Commission (FSC), which appoints or removes the commissioner of the Office of Insurance Regulation (OIR), as well as approves all administrative regulations or “rules.” Insurers operating in Florida are often advised to monitor the activities of the FSC as a whole and the viewpoints of each member.
The state also has a mandatory government-run property catastrophe reinsurance program, the Florida Hurricane Catastrophe Fund, and a body that regulates the use of catastrophe models in rate filings, the Florida Commission on the Hurricane Loss Projection Methodology.
On Thursday, October 18, the Property Casualty Insurers Association of America (PCI) will host a forum featuring industry and thought leaders discussing the urgent need to work together to identify solutions for bridging the flood insurance gap.
Millions of families and businesses are underinsured or uninsured for natural catastrophes. Hurricanes Michael and Florence are yet another reminder that policymakers, insurers, thought leaders, and consumers need to work together to identify solutions to bridge the flood insurance gap. The discussion will focus on solutions to prevent this devastating and catastrophic trend from continuing.
Don Griffin, Department Vice President of Policy Research and International, PCI
Scott Giberson, Principal of Flood Compliance, CoreLogic John Rollins, Actuary, Milliman
Michael Lyons, President and CEO, Weston Insurance Holdings Corporation
Forum on “Flood Insurance: Bridging the Gap”
Thursday, October 18, 12:00 p.m. ET
2247 Rayburn House Office Building, Washington, DC
Media should rsvp to Eileen.Gilligan@pciaa.net
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