LLoyds of London calls for end to US home building in High Risk areas
Torrential rains caused heavy flash flooding in some parts of the US over the last few days, and led to numerous evacuations in southeast Texas, and Kansas. But the threat of severe weather lessened over the long Memorial Day holiday for many places, though Tropical Depression Bonnie continued to bring rain and wind to North and South Carolina.
With heavy rain continuing and river forecast to crest at a record high level, Texas can expect little relief Tuesday from flooding that claimed 7 lives over the Memorial holiday weekend.
Most of the deaths took place in rural Washington County, Texas, between Austin and Houston, where more than 16.5 ins of rain fell in some places late last week.
10 ins of rain fell in the past 72 hours over the most impacted areas and more rain expected through Friday, the Federal Emergency Management Agency reported Tuesday.
Dozens of rivers were in flood stage across the central and southern Plains as of Tuesday, the weather service said.
The heaviest storms are expected to impact Oklahoma and central and western Texas through Wednesday night, before shifting into eastern Texas, including Houston, by Thursday.
The weather service has placed much of the state of Texas under a flash flood watch. This includes the metro areas of Dallas-Ft. Worth, Austin and San Antonio.
Rounds of heavy thunderstorms will raise the risk of flooding across the south-central US into Friday, AccuWeather said.
Now a major insurer is calling for an end to government subsidies that encourage expensive house-building schemes in areas of the US at high risk of flooding.
Lloyd’s, one of the world’s biggest insurance companies, says the US government must stop providing insurance subsidies to homeowners building on flood plains and in coastal areas exposed to mounting risks related to climate change.
According to a report in London’s FT, Lloyd’s says the US government’s National Flood Insurance Program (NFIP), which subsidizes insurance cover for householders in regions vulnerable to floods and storms, encourages irresponsible house building.
Lloyd’s also says the NFIP subsidy regime is financially unsustainable. Because of claims related to disasters such as Hurricane Katrina in Y 2005 and Super-storm Sandy in 2012, the NFIP has now run up debts of more than $24-B.
Insurance companies have been among those at the forefront of analyzing the financial implications of climate change and assessing climate-related risk worldwide.
In the run-up to the UN conference on climate change in Paris last December, insurance companies pressed for more concerted action on global warming, saying it posed a serious threat to the future of the industry.
Insurers say rising payouts related to climate change and weather in heavily-insured western countries such as the US result in less money being made available to provide affordable insurance in developing countries, where it is most needed.
A report by Munich Re, one of the insurance industry’s leaders in analysing climate change, says the world’s most deadly and costly catastrophe in Y 2015 was the Nepal earthquake in April, resulting in at least 9,000 dead and billions of dollars worth of damage.
“As is so often the case in developing countries, only a fraction of the $4.8-B in overall losses caused by the quake and the aftershocks was insured; $210-M,” says Munich Re.
The situation in the US is just the opposite, with heavy NFIP subsidies and other local, state-controlled schemes for too many homes built in areas exposed to storms and flooding.
“Intended as a disaster relief program, the federal flood insurance scheme is really a land development policy”
The most glaring example is along the coast of Florida, a region that is regularly hit by hurricanes and giant storms. Coastal lands are also threatened by sea level rise related to climate change. Yet despite these risks, the area has seen a steep rise in population and housebuilding.
In Y 1992, Hurricane Andrew hit the Florida coast, causing an estimated 65 deaths and causing $25-B of damage to housing and businesses.
With encouragement from insurance schemes subsidized at federal and state levels, the damaged areas have all been redeveloped. And insurance experts say that if a similar storm were to hit the Florida coast now, more lives could be at risk and losses would amount to $50-B.
Professor Omri Ben-Shahar, an expert on insurance law at the University of Chicago, argues that government subsidies mean that flood policies are being sold at bargain prices.
He says the system is hard to justify, with middle-class taxpayers living inland having to subsidise mostly upper-income owners of coastal homes.
“Government-provided insurance made sure that premiums were low enough to sustain ongoing development and a massive relocation of population to regions which, we now know, are borderline inhabitable,” says Prof. Ben-Shahar.
After the government had to pay out massive amounts in claims in Y 2012 in the aftermath of super-storm Sandy, the US Congress decided to phase out NFIP and its insurance subsidies. As a result, insurance premiums in some coastal areas rose 10X.
An intense lobbying campaign followed, and much of NFIP is now back in place.
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