A good start
President Obama’s executive order in January 2015 establishing a new Federal Flood Risk Management Standard requires all federal agencies to consider climate change and other flood risk associated with federal facilities, projects, financing activity, or water and land use decisions.
Used to evaluate and understand the flood risk for new buildings and substantial improvements, the new standard requires federal agencies to: (a) use the best, actionable, climate science; (b) build two feet (60 cm) above the 100-year (1 percent) flood level; or (c) build at least at the 500-year (0.2 percent) flood level.
While the executive order is largely an inspirational directive because it requires federal agencies to implement it through the regulatory process, it reflects a prudent approach for structures in or near flood plains.
As the useful life of most buildings or projects is decades, decisions regarding where and how to build with federal resources must consider the future climate and environmental conditions. The approach taken in the executive order and related draft regulations is appropriate: avoid the flood risk by choosing where to build wisely, use natural defences, and build high and strong enough to withstand the expected floods, storm surge and wave action.
The Reinsurance Association of America (RAA) strongly supports the standard’s approach. The Administration has rightly raised the bar and made community resilience a priority and a public value.
Risk-appropriate land use and construction standards are an essential part of creating more resilient communities. Equally important is the role of risk transfer to increase financial resilience and assure funds will be available to make appropriate, timely repairs to structures or projects after an event.
The new flood risk management standard provides steps to increase physical resilience, as do the related National Flood Insurance Program (NFIP) guidelines. Although they reduce risk, however, the standards cannot guarantee that buildings or projects will withstand all weather-related events that occur over their expected useful lives.
A holistic approach to the risk of flood and climate change is needed and the executive order is a good first step. The next step is to address financial resilience through risk transfer to protect taxpayer investments and to protect taxpayers from enormous NFIP deficits and post-disaster infrastructure spending.
The private reinsurance market wants to insure floods and other natural catastrophe risk and can help the NFIP and other federal agencies to increase the nation’s financial resilience.
Dennis Burke is the vice president, State Relations, at the Reinsurance Association of America. He is responsible for planning and executing the lobbying strategies in all 50 states, and at the National Conference of Insurance Legislators (NCOIL) and the National Association of Insurance Commissioners (NAIC). He can be contacted at: burke@reinsurance.org
