Govt.FloodSolutions Flashcards
why was the Task Force on Flood insurance and relocation established?
- to explore solutions for high risk areas and potential relocation strategies
- prioritized engagement with indigenous communities
identify and briefly describe the 3 types of flooding
- fluvial: water level overflows onto neighborhood land
- pluvial: extreme rainfall
- coastal: dry and low lying land submerged by seawater
identify 5 priority areas for action under EMS (Emergency Management Strategy)
- enhance whole of society collaboration
- improve understanding of disaster risks
- increase focus on whole of society prevention and mitigation
- enhance disaster response capacity
- strengthen recovery efforts by building back better to minimize impacts of future disasters
define the term “risk” in the context of disasters
combination of likelihood and consequence of a specified hazard being realized
compare “hazard” and “risk”
flood is a hazard, but it doesnot become a risk unless assets (people, property) are affected by it
i.e. need consequences attached
identify and describe the 2 key drivers of Canada’s flood risk
1) population growth and urban development
- urban densification in flood prone areas contributes to flood risk
- urban centers are more prone to flood risks due to their locations on or near coastlines
2) climate change (HEAR)
- Heat induced risks
- Extreme precipitation
- Accelerated warming
- Risking sea levels
identify 3 problems pertaining to flood insurance in Canada
1) High cost
- especially for low income households
- recent flood events cause increased premiums an possibly withdrawal of coverage altogether
2) Low risk awareness
- information about floods, including flood maps may be unavailable
3) misaligned incentives
- taxpayer funded DFA programs contribute to a moral hazard
- because people may rely on that instead of buying insurance
fully describe the implications of low risk awareness on flood risks in Canada
- no coverage: people may not purchase flood insurance if they are not aware of the risk
- no coverage: people may think their standard homeowner’s policy covers flood when it doesn’t
- insufficient coverage: people who do buy optional flood coverage may have insufficient protection
- insufficient mitigation: people may be less likely to invest in property level flood protection
fully describe the moral hazards associated with misaligned incentives regarding flood risks in Canada
Generally,
- moral hazard is the expectation that governments will provide post disaster financial assistance regardless of poor decisions by individuals and communities on where to build
Particularly,
- HO: DFA doesn’t encourage risk reduction or insurance purchase
- communities: local governments and developers benefit from property sales and tax revenues but flood recovery costs fall largely on other levels of government
- regional and national: cost sharing of disaster recovery reduces incentive for risk reduction which may include expensive infrastructure
briefly describe the 4 concepts of FRM (Flood Risk Management)
- alternative approach to conventional flood control measures
- promotes the use of non structural mitigation measures to complement and enhance other types of mitigation
- stakeholders include: govt/industry/communities/non gov organizations/individuals
- an iterative process of: acting, monitoring, reviewing, adapting
regarding FRM, identify RRs of federal government
Role: more broad, Resp: specific task
- role: support provincial and local efforts to mitigate flood emergencies
- resp: monitor emergencies, financial assistance
regarding FRM, identify RRs of provincial/territorial government
- regulate insurers
- implement land use and flood risk management policies
regarding FRM, identify RRs of municipal government
- lead local response and recovery during emergencies
- invest in structural and non structural flood mitigation
regarding FRM, identify RRs of indigenous communities
- develop community emergency management plans
- address unique geography and social challenges in remote communities
regarding FRM, identify RRs of the insurance industry
- provide flood insurance
- offer overland flood endorsements
regarding FRM, identify RRs of non government groups
- acts as initial responders during flood incidents
- coordinate volunteers in recovery efforts
regarding FRM, identify RRs of communities and individuals
- seek information to understand their property’s flood risk
- purchase flood insurance
identify the necessary preconditions for success of a private flood insurance market
LIAP (liar with a p)
- Limit post disaster financial assistance from government to encourage flood mitigation investment
- Investments in public and private flood defenses
- Accurate and up to date flood mapping
- Public awareness of flood risk
identify prevention and mitigation measures an individual household can implement (benefit to cost 11:1)
- install a backwater valve
- having a basement sump pump
- maintaining appropriate lot grading
- clearing eaves troughs and extending downspouts
identify prevention and mitigation measures a community can implement (benefit to cost 6:1)
- adopt climate resilient best practices
- upgrade infrastructure
- invest in natural infrastructure
identify prevention and mitigation measures that can be implemented on a national level (benefit to cost 7:1)
- stricter building codes
- improved flood risk information
- investments in climate resilience
- funding for watershed level mitigation projects
describe the concept of strategic relation
BRRR…COLD
- Buyout
- Remove assets from high risk properties
- Restore site to underdeveloped state
- repurpose site as green infrastructure
identify the inputs for the PS (Public Safety of Canada) approach for estimating flood damages
fec
- flood hazard: extent, magnitude, prob of occurrence
- exposure: people, infrastructure, property
- consequence: floodwater damage
identify the outputs for the PS (Public Safety of Canada) approach for estimating flood damages
risk
- predicted loss of people/infrastructure/property
- average annual loss from flooding
- return period level losses for residential properties in Canada
discuss the methodology for estimating flood hazards
Canada has 2 types of flood hazard information
1) local regulatory flood mapping
2) broad coverage models mainly used by insurance firms
- regulatory mapping is very accurate but available only in selected areas
- broad coverage models provide nationwide data
identify 3 advantages of broad coverage models
- national wide coverage
- provides flood depths for standard return periods
- captures different flood types of fluvial, pluvial and coastal
discuss the methodology for estimating flood exposure
- requires a comprehensive residential properties database
- requires building attributes, informed risk and flood susceptibility
- dataset was further broken down to individual households for consequence estimation
discuss the methodology for estimating consequences
- relate flood depths in the models to estimate flood losses of residential properties
- this is done using depth damage models
identify the design characteristics for flood insurance programs
CAPP
- Choice: voluntary or compulsory
- Administration: role of govt vs role of private insurers
- Packaging: standalone product or bundled with other perils
- Premiums: risk based or uniform pricing
describe the flood insurance program in Australia
1) Admin:
- government regulates the industry with minimal financial burden
- promotes private partnerships for risk management
2) Choice:
- voluntary both offering and uptake吸收
- varied availability based on flood risk levels
3) Packaging
- often bundled with other perils
- coverage and specific flood related perils vary by insurer
4) Premiums:
- risk based
- not regulated or subsidized by the government
- potentially high for highest risk properties
- retrofits recognized in premium calcs
describe the flood insurance program in France
1) Admin:
- govt oversees CATNAT
- CATNAT supported by state owned CCR (that reinsures insurers)
- local govt are encouraged to adopt risk reduction plans
2) Choice:
- home insurance including catnat compulsory for property owners with a mortgage
- voluntary otherwise
3) Packaging:
- bundled
- catnat covering flood and other natural disasters is added to all property insurance contracts
4) Premiums:
- uniform pricing
- 12% surcharge on home insurance policies for natural disasters
- no incentive for property level mitigation
describe the flood insurance program in UK
1) admin:
- Flood Re manages the flood insurance system
- Flood Re pool is a private sector entity accountable to the government
2) choice:
- not compulsory by law but often required by mortgage lenders for high risk properties
- voluntary for properties without a mortgage or low risk properties
- availability for high risk properties limited to those built prior to 2009
3) packaging:
- bundled with homeowner’s policy
- ceded to flood re when premiums exceed an affordability cap
4) premiums:
- reflect home values rather than risk level
- affordability is prioritized
- supplemented by a levy on all residential policies
- criticism is that high value properties are effectively subsided
describe the flood insurance program in USA
1) admin:
- NFIP (National Flood Insurance Program) administered through FEMA (Federal Emergency Management Agency)
- some involvement from private insurers
2) choice:
- compulsory for homeowners with federally backed mortgages in flood prone areas
- voluntary else where
3) packaging:
- standalone
- discounts for communities implementing risk reduction measures
4) premiums:
- risk based
- some older government subsidized policies will transition to risk based
identify considerations for guiding the development of flood policy options in Canada
1) minimize uncertainty
- invest in risk reduction in high risk areas to expand insurability
2) maximize market penetration and minimize adverse selection
- incentivize or require the purchase of flood insurance through bundling of flood coverage with other perils
3) design for affordability
- prioritize means testing to guide any public subsidy to households for flood insurance affordability
- end goal is risk based rates for everyone
4) minimize moral hazard
- implement minimum deductibles and avoid incentivizing new development in high risk areas
describe the policy goals and objectives of Canada’s Task Force on flood insurance
AAAPRV
- Adequate and predictable compensation: settle claims quickly and accurately
- Affordable: inclusive and equitable for customers
- Available: for all types of floods and in all geo areas for all risk levels
- Participation: ensure premiums are affordable and provide incentives purchasing
- Risk based pricing: incentives risk reduction and minimizes moral hazards
- Value for money: reduce burden on public DFA, shift expenditures from recovery to mitigation and adaption
describe the assumptions related to the 4 actuarial flood insurance models of the task force on flood insurance
- total flood risk: 2.9B annual residential flood damage
- organizational start up costs: not included but on going operational and maintenance expenses are included
- lifespan of model: 25 years
- climate change and inflation not considered
4 conceptual models for flood actuarial analysis
- flat cap high risk
- tiered high risk pool
- public insurance
- public reinsurance
how are the highest risk (top 10%) homeowners for flood risk identified?
AAL or prems >=0.1% of coverage
would a flood premium of $250 for $500,000 of coverage be considered as high risk?
no because 250<500
identify strategies for increasing affordability of flood insurance
- premium caps
- subsides based on income
identify 2 items that are covered by premium load factors in flood insurance
any 2 of
- administrative and operational costs
- risk buffers
- living expenses
what is cross subsiziation?
a transfer of some premium costs from high risk to low risk homeowners
do high deductibles reduce participation?
yes, but high deductibles also encourage risk mitigation by homeowners
define residual risk
the amount of financial risk left in the system once insurance options have been applied
who pays the cost of residual risk in the context of residential flood insurance?
uninsured and underinsured homeowners
how can low participation rates be improved in Canada where flood insurance is not mandatory?
- awareness of risk through education
- lower premiums
identify 1 benefit of standardization of flood policies
- simplified policy language
- unified coverage types
- bundling of perils for clairity
describe the flat cap high risk pool model for flood insurance
- a high risk pool with minimal intervention by government but with low premium cap and significant support from government
- house holds at high risk of flooding included
-no income based subsidies - 20$ levy on all policies
- mandatory offer, optional purchase
describe the tiered high risk pool model for flood insurance
- high risk pool with added intervention by government, 5 levels of cap based on quantiles of reconstruction costs
- households at high risk of flooding included
- no income based subsidies because tiered premium caps
- 40$ levy on all policies
- mandatory offer, mandatory purchase with mortgage, optional without mortgage
describe the public insurer model for flood insurance
- a crown corporation (corporation owned by the government)
- underwrites flood insurance with private insurance as the intermediary
- higher premium cap (3k) with automatic government backstop
- all households are included
- income based subsidies is a sliding scale
- $45 levy on all policies
- mandatory offer and purchase via bundling with homeowner’s policy
describe the public reinsurer model for flood insurance
- a layered approach that builds on private and public used models
- 1st layer is an optional purchase from private market at risk based rates at modest limit
- 2nd layer is a mandatory purchase above modest limit but subsidized by crown corporation
- no prem cap for 1st layer, prem cap of 3k for 2nd layer
- all households included
- no income based subsidies for 1 st layer, sliding scale for 2nd layer
- $20 levy on all policies
- mandatory offer, optional purchase for 1st layer
- mandatory offer & purchase for 2nd layer via bundling with homeowner’s policy
compare 4 flood insurance models on general orgnization
High-Risk Pools used for
- flat cap high risk pool
- tiered high risk pool (5 levels or tiers)
Crown Corporation used by
- public insurer (underwrites insurance through private insurers)
Public and Private elements used by
- public reinsurer (uses 2 layers)
compare the 4 flood insurance models on who is included
include only high risk households:
- flat cap high risk
- tiered high risk
include all households
- public insurer
- public reinsurer
what are 3 advantages of public reinsurer
- flexibility in purchase offer
- strong risk reduction incentives to homeowners
- requires reduced funding but retains good coverage for major events
compare the 4 flood insurance models on income based subsidies
no subsidies:
- flat cap high risk
- tiered high risk
- public reinsurer - 1st layer only
sliding scale subsidies:
- public insurer
- public reinsurer - 2nd layer only
compare the 4 flood insurance models on cross subsidization
all models have a small levy (20/40/45/20)
compare the 4 flood insurance models on participation assumptions
mandatory offer/optional purchase
- flat cap high risk
- public reinsurer - 1st layer only
mandatory offer/mandatory purchase with mortgage/otherwise optional purchase
- tiered high risk pool
mandatory offer/mandatory purchase (via bundling)
- public insurer
- public reinsurer -2nd layer only
which flood insurance model contain significant residual risk?
- flat cap high risk pool
- tiered high risk pool
which flood insurance model is mots costly to governments?
public insurer but cost per capita basis for high risk households is reasonable
which flood insurance model provides the greatest flexibility and risk reduction incentives?
public insurer
identify 3 reasons that the costs of flood risk may increase over time
- inflation
- climate change
- population growth in flood prone areas
briefly describe 2 potential flood de risking measures
1) restrict eligibility for the highest risk homeowners
- reduce costs
- but leaves many homeowners unprotected so requires significant government spending in a cat
2) strategic relocation
- reduces costs
- but is potentially disruptive and lengthy
which flood insurance policy objective performs strongly for all flood insurance models?
availability performs strongly for all models because all provide comprehensive geographical coverage
which flood insurance models perform strongly on 5 of the 6 flood insurance policy objectives?
public insurer
- performs strongly on all policy objectives except risk reduction
public reinsurer
- performs strongly on all policy objectives except affordability
which flood insurance models perform weakly on at least 1 policy objective
flat cap high risk pool
- weak on participation because residual risk is high
- weak on value of money because it’s expensive for the government
which flood insurance model has strong performance for the fewest number of policy objectives?
Tiered High Risk Pool
- performs strong only for availability
which policy objective perform strongly for only1 model? Identify the model
Risk Reduction performs strongly only for Public Reinsurer model
- balance homeowner and government mitigation incentives
- encourages individual and community level risk reduction strategies
review the table of policy objectives and flood insurance models
briefly describe 4 key findings of the Task Force on Flood Insurance and Relocation
4 categories
1) relocation considerations
- relocation is powerful but disruptive
2) insurance considerations
- standardization of policy language
3) current flood risk
- total flood risk is currently estimated at 2.9B, about 1/3 of this total is concentrated in top1% of the riskiest homes
4) equity considerations
- affordability & education is key
- cultural connections of indigenous people to water and land must be respected
