The Arizona Daily Star has a post about recent flood mitigation measures taken in Tucson, and opens with this: “This is a great Christmas present for 600 property owners,” said Tucson City Councilman Steve Kozachik, whose council ward covers some of the affected neighborhoods. Kozachik further says that homeowners will likely save since they will not be required to purchase flood insurance from FEMA. This kind of defeats the purpose of insurance. The purpose of insurance is to insure against unlikely events, and not to ensure payment when a likely disaster strikes. For these homeowners, the reduced likelihood, though not
There’s a great review article in the International Journal of Disaster Risk Reduction on the Australian approach to government-run disaster risk pools. The key takeaways are: Get your pricing right, Pricing reflective of risk signals peril to market participants, and Financial risk reduction is not real risk reduction. All of this applies to the NFIP. Pricing is out of step with real risk and that’s the primary reason the program is in debt. Further, pricing subsidies do not expose purchasers to real risk and they do not understand how much risk there is. Finally, and this is really important, better
The NFIP is broke, or so I say in my new article in The Conversation: Floodwaters continue to rise, so it will be days if not weeks before we can calculate the final costs, both in terms of life and property. But regardless, many will be turning to the federal government’s National Flood Insurance Program (NFIP) for help – it’s the only way to insure a property against damage from flooding. Unfortunately, it’s broke – and its very nature encourages development that makes each flood more damaging than the last. Many thanks to Bret M. Webb for his comments an
I’ve done this before: Post by James Howard. But I might have a real problem. Apparently MEININGER Hotels posted this: I’ve not verified it was actually posted, mostly because I am afraid of the answer. But when presented with an opportunity at the Château Laurier in Ottawa, I did this: Post by James Howard.
Histogram of NFIP claims from 1996 to 2010 in 2010 constant dollars—it looks like it might be log-normally distributed.