How the USA can benefit from risk-based premiums combined with flood protection

Lars T. Ruig (), Toon Haer, Hans Moel, Samuel D. Brody, Wouter Botzen, Jeffrey Czajkowski and Jeroen C. J. H. Aerts ()
Additional contact information
Lars T. Ruig: VU University Amsterdam
Toon Haer: VU University Amsterdam
Hans Moel: VU University Amsterdam
Samuel D. Brody: Texas A&M University Galveston Campus
Jeffrey Czajkowski: National Association of Insurance Commissioners (NAIC)
Jeroen C. J. H. Aerts: VU University Amsterdam

Nature Climate Change, 2022, vol. 12, issue 11, 995-998

Abstract: Abstract Flood risk management in the USA is largely embedded in the National Flood Insurance Program (NFIP). Climate change and increasing exposure in flood plains pose a challenge to flood risk managers and make it vital to reduce risk in the future. The proposed reforms are steering the NFIP to risk-based premiums, but it is uncertain if the reforms will result in unaffordability and incentivize risk-reduction investments or how the NFIP is affected by large-scale adaptation efforts. Using an agent-based model approach for current and future scenarios, we demonstrate that risk-based premiums will yield a positive societal benefit (US$10 billion) because they will incentivize household risk-reduction investments. Moreover, our results show that proactive investment in large-scale adaptation measures complements a transition to risk-based premiums to yield a higher overall societal benefit (US$26 billion). We suggest that transitioning the NFIP to risk-based premiums can only be secured by additional investments in large-scale flood protection infrastructure.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.nature.com/articles/s41558-022-01501-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nat:natcli:v:12:y:2022:i:11:d:10.1038_s41558-022-01501-7

Ordering information: This journal article can be ordered from
https://www.nature.com/nclimate/

DOI: 10.1038/s41558-022-01501-7

Access Statistics for this article

Nature Climate Change is currently edited by Bronwyn Wake

More articles in Nature Climate Change from Nature
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().