Climate change poses major risk to flood insurance program, experts warn

Environmental experts on Wednesday warned House lawmakers about risks to the National Flood Insurance Program (NFIP) posed by climate change, saying the situation is likely to worsen in the coming years.

The hearing, hosted by the Financial Services Subcommittee on National Security, International Development and Monetary Policy, focused on the macroeconomic effects from climate change and the monetary risks associated with it. 

“Flood insurance is top of perils we have to face,” said Andy Karsner, who served as U.S. Secretary for Energy Efficiency and Renewable Energy during the George W. Bush administration. “It is imperative for [insurance companies] to develop new tools of risk management because they are operating on very old model inputs and ancient legacy flood maps.”

Subcommittee Chairman Emanuel Cleaver (D-Mo.) said the Financial Services Committee has had to “deal with the issue of flooding repeatedly.”

“In my state of Missouri, just in the first 5 months of the year we have had 262 flash floods,” he said. “It has been decimating for our farm community.”

The NFIP covers more than 5 million flood insurance policies and collects approximately $4.75 billion in premiums, fees and surcharges each year, according to a May report by the Congressional Research Service.

But, in 2017-2018, hurricanes Harvey, Maria, Irma, Florence and Michael crippled the federal program, leading to billions in losses. President Trump later signed a disaster relief bill that included provisions to help the NFIP pay off the claims.

Marshall Burke, assistant professor of earth system science at Stanford University, said at Wednesday’s hearing that the evidence from climate change research suggests southern states are most vulnerable to flooding.

“On the coast, what we know about tropical cyclones or hurricanes — we don’t have clear evidence that there will be more or less of them — but we know they will be more powerful and move more slowly. That will dramatically increase the likelihood of coastal flooding,” Burke said.

Because of the upsurge in the power and frequency of hurricanes, some lawmakers have been looking to expand the role of private insurers in the NFIP to share the risk and to ensure the availability of flood insurance. But it is unclear whether letting private insurance companies take on more risk will effectively help mitigate the problem.

“Everyone, everything, has insurance for home, for business, for transportation — and what I’ve been told by the executives across the industry is they cannot have in a single year Houston, Miami, and San Juan Puerto Rico go down in this way bleeding balance sheets,” said Karsner, who is now executive chairman at Elemental Labs.

Updated at 8:30 p.m.