Reforms are required to maintain a healthy and robust flood insurance market under future climate conditions for the United States. Therefore, policymakers should implement premiums that reflect flood risk and incentivize household-level risk reduction, complemented with regional flood adaptation investments.
Messages for policy
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Charging flood insurance premiums that reflect true flood risk incentivizes flood risk reduction by policyholders, thereby reducing residential flood risk across the United States moving forward in time.
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Risk-based premiums introduce substantial heterogeneity in premiums at a localized flood risk scale, which is beneficial for some households but implies unaffordability for others.
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The combined effects from introducing risk-based premiums to incentivize individual building risk reduction results in a positive societal impact.
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Complementing risk-based premiums with large-scale, regional adaptation investments by the government results in the highest societal benefit.
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Investing in flood protection infrastructure will reduce some of the equity issues that arise when solely moving to risk-based premiums.
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Further Reading
Aerts, J. C. J. H. et al. Evaluating flood resilience strategies for coastal mega-cities. Science 344, 473–475 (2014). Cost–benefit analysis of building scale and governmental flood protection measures for the coastal city of New York.
Aerts, J. C. J. H. et al. Integrating human behaviour dynamics into flood disaster risk assessment. Nat. Clim. Change 8, 193–199 (2018). Integrating behavioural dynamics in flood risk assessment models.
de Ruig, L. T. et al. An economic evaluation of adaptation pathways in coastal mega cities: an illustration for Los Angeles. Sci. Total Environ. 678, 647–659 (2019). Cost–benefit analysis of dynamic adaptation pathways for Los Angeles.
Hudson, P., Botzen, W. J. W. & Aerts, J. C. J. H. Flood insurance arrangements in the European Union for future flood risk under climate and socio-economic change. Glob. Environ. Change 58, 101966 (2019). Dynamic Integrated Flood and Insurance (DIFI) model for evaluating insurance reforms.
Haer, T., Botzen, W. J. W. & Aerts, J. C. J. H. Advancing disaster policies by integrating dynamic adaptive behaviour in risk assessments using an agent-based modelling approach. Environ. Res. Lett. 14, 044022 (2019). Agent-based model for flood risk assessment in Europe.
Acknowledgements
This research received funding from the Netherlands Organization for Scientific Research (NWO) VIDI (45214005) and VICI (016140067 and 453-13-006) grant programmes, and ERC advanced grant (884442).
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de Ruig, L.T., Haer, T., de Moel, H. et al. Climate-proofing the National Flood Insurance Program. Nat. Clim. Chang. 12, 975–976 (2022). https://doi.org/10.1038/s41558-022-01502-6
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DOI: https://doi.org/10.1038/s41558-022-01502-6
