Climate change and Gisele, the law of the land
Insurance subsidies exacerbate climate change risks.
That comes from Washington, D.C.-based R Street, a typically conservative nonprofit public policy research organization that supports free markets, and a limited but effective government
However, responsible environmental stewardship is also part of the group’s mantra.
According to a policy short authored by R Street Texas Director Josiah Neeley, years of government involvement in property insurance markets have led to artificially low rates that mask the true risk of living in regions prone to dangerous weather.
“It cannot be ignored the extent to which government policy at both the state and federal level has encouraged people to live in flood-prone and storm-prone areas. Government subsidies have distorted market signals, leading many into a false sense of security about the risks they face,” the report states. “Artificially low rates provide signals that living in a specific location involves less risk than it actually does, leading more people to live and move to vulnerable areas.”
The report refers to data showing that 123 million people live in coastal counties, and it partly blames the National Flood Insurance Program for that.
The NFIP has “suppressed the creation of a private flood insurance market” with subsidies and outdated flood maps, according to the report.
“Subsidizing people to live in disaster-prone areas is wrong in fiscal, environmental and moral terms,” the report states. “To the extent lawmakers recognize climate change and sea-level rise as real problems, they need to stop government action that exacerbates these risks and leads more people to put themselves in harm’s way.”
The report also tees off on TWIA – the Texas Windstorm Insurance Association.
The state-created pool provides windstorm insurance for 14 coastal counties, and Harris County. Despite its stated goal of moving TWIA policyholders back into the private market, the pool has grown enormously over recent decades, the report notes.
“Originally intended to be an insurer of last resort for those who could not obtain windstorm insurance through the private market, TWIA has expanded rapidly,” the report states. “It has grown from approximately 50,000 policies in 2000 to about 275,000 policies today.”
To be fair TWIA has increased rates 5 percent each year from 2011 through 2016, a cumulative increase of 34 percent over the six-year period. And based on a 2016 actuarial analysis, TWIA rates would need to increase by roughly 24 percent overall in order to be actuarially adequate, according to TIWA’s website.
“Current TWIA rates are uniform throughout the 14 first tier coastal counties,” the site states. “Because rates do not vary based on any geographical factors, such as distance from the coast, rates may be actuarially adequate in some areas.
TWIA has improved its financial position in recent years partly due to the rate increases, a lack of storm activity and voluntary depopulation programs. However, TWIA’s rates remain below actuarially sound levels, according to the report.
“Aside from these fiscal problems, subsidized flood and windstorm insurance programs raise serious environmental concerns,” the report states. “Subsidizing people to live in disaster-prone areas is wrong in fiscal, environmental and moral terms. To the extent lawmakers recognize climate change and sea-level rise as real problems, they need to stop government action that exacerbates these risks and leads more people to put themselves in harm’s way.”
