Missouri floods in the 1920s caused significant damage.Private insurers pulled out of the market for decades.Gilbert White proposed national flood insurance in 1942.After initial trials in 1956, NFIP comes in 1968Changes include introduction of flood mitigation standards --and requirements for actuarial soundness
Flood Insurance implemented to piggy back on homeowners policiesFEMA manages the National Flood Insurance FundTraditional insurers provide administrative dutiesSevere losses from major storms.--Katrina hit ~16B losses--Rita ~2B lossesFlood mitigation comes from three programsFMASRLRLF
This is fundamentally an economic analysisWill cover from 1996-2009Will address both flood mitigation and flood recoveryHave recoded info for local governmentsStatewide-allocation issues - by population makes distribution more equitable - by income biases toward inequitable
BCA may be considered as a balance sheet, looking like an accounting questionBCA can also be considered as the sum of economic surpluses contributing to the NSBDelta-S is the change in S due to the programThis takes advantage of that thought to simplify the development of the flood insurance NSB model
This is the key equation in valuing the flood insurance component represents 1 year's net social benefits k is the amount of claims in a given year e is the exante adjustment to the expost willingness to paym is the marginal excess tax burden phi is the WYO premium to insurers varpi is the premiums paid to the NFIP pi is the historical profit ratio of insurers
This is what the Multi-Hazard Mitigation Council foundforms a major baseline in establishing the NSB of flood mitigation todayBCR is lifetime returns (at 50 years). MMC report premised on funds spent in year 0 and a useful lifetime of 50 yearsThe 2% SDR is removed and we are free to apply our own SDR
Measuring the Impacts of the National Flood Insurance Program
Measuring the Impacts of theNational Flood Insurance ProgramJames P. Howard, IIUniversity of Maryland Baltimore Countyhoward5@umbc.edu or email@example.comWilliam and Mary Graduate Research Symposium23 March 2012
Benefit-Cost Analysis Analytical Method Data Estimates social costs and County-level data benefits Provided by FEMA Monetizes social costs and benefits Includes insurance financial statements Uses social discounting Grant program information
Theoretical Models Flood Insurance Flood Mitigation Benefits Benefits transfer Insurance payments Uses estimates of other Administrative fees mitigation projects Tax benefits Scales-up estimates to national level Willingness-to-pay Assumes estimate is broadly Costs applicable across time Insurance premiums Environmental impacts
$16.7 Billion Covers 1996-2009 Represents net benefits from nationwide data Preliminary, baseline figure Does not consider social impact factors Should not be used for policymaking
Future Directions Sensitivity analysis to find bounds of value Social weighting by impact quality Break-even analysis Incorporation of different estimators Willingness-to-pay for flood insurance Benefit-cost ratios for flood mitigation projects
Acknowledgements Photo Credits Advising and Review Brisbane City Council Prof. Scott Farrow, UMBC United States Fish and Wildlife Service Grant Support University of Maryland Baltimore County Graduate Student Association
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