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Measuring the Impacts of the National Flood Insurance Program
1. Measuring the Impacts of the
National Flood Insurance Program
James P. Howard, II
University of Maryland Baltimore County
howard5@umbc.edu or jh@jameshoward.us
William and Mary Graduate Research Symposium
23 March 2012
3. 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
4. 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
7. $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
8. 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
9. 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
Notes de l'éditeur
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