The development of catastrophe models in recent years allows for assessment of the flood hazard much more effectively than when the federally run National Flood Insurance Program (NFIP) was created in 1968. We propose and then demonstrate a methodological approach to determine pure premiums based on the entire distribution of possible flood events. We apply hazard, exposure, and vulnerability analyses to a sample of 300,000 single-family residences in two counties in Texas (Travis and Galveston) using state-of-the-art flood catastrophe models. Even in zones of similar flood risk classification by FEMA there is substantial variation in exposure between coastal and inland flood risk. For instance, homes in the designated moderate-risk X500/B zones in Galveston are exposed to a flood risk on average 2.5 times greater than residences in X500/B zones in Travis. The results also show very similar average annual loss (corrected for exposure) for a number of residences despite their being in different FEMA flood zones. We also find significant storm-surge exposure outside of the FEMA designated storm-surge risk zones. Taken together these findings highlight the importance of a microanalysis of flood exposure. The process of aggregating risk at a flood zone level-as currently undertaken by FEMA-provides a false sense of uniformity. As our analysis indicates, the technology to delineate the flood risks exists today.
[1]
H. Kunreuther,et al.
Redesigning Flood Insurance
,
2011,
Science.
[2]
Kathleen A. McCullough,et al.
A Comparison of Hurricane Loss Models
,
2010
.
[3]
H. Kunreuther,et al.
Catastrophe modeling : a new approach to managing risk
,
2013
.
[4]
C. Kousky,et al.
Come Rain or Shine: Evidence on Flood Insurance Purchases in Florida
,
2010
.
[5]
E. S. Overman.
The Flood Peril and the Federal Flood Insurance Act of 1956
,
1957
.
[6]
Forrest J. Masters,et al.
Hurricane hazard modeling: The past, present, and future
,
2009
.
[7]
H. Kunreuther.
Disaster Insurance Protection: Public Policy Lessons
,
1978
.
[8]
Jean-Paul Pinelli,et al.
Predicting losses of residential structures in the state of Florida by the public hurricane loss evaluation model
,
2010
.
[9]
Dan R. Anderson.
The National Flood Insurance Program. Problems and Potential
,
1974
.