Hurricane risk models 'aren’t capturing what’s happening': Former FEMA director
Florida’s insurance market was depleted long before Hurricane Ian made landfall, with six insurers deemed insolvent this year alone.
The aftermath of the most powerful storm to hit Southern Florida is expected to exacerbate the slow-moving crisis further, leaving millions of residents in the state without insurance coverage.
“Terms like 100-year events and 1,000-year events really aren't capturing what's happening,” Craig Fugate, former FEMA director under President Obama, told Yahoo Finance Live (video above). “This will be billions and billions of dollars in losses both from the insurance company but also from federal taxpayers having to pay for this response.”
Pricing in risk
Catastrophe modeler Karen Clark and Co. (KCC) estimated that privately insured losses from Hurricane Ian will be close to $63 billion. That would amount to the largest hurricane loss in Florida history, with total economic damage from Hurricane Ian easily topping $100 billion, according to KCC’s analysis.
Florida is no stranger to hurricanes, with the cleanup from extreme weather events a near annual tradition. But as communities increasingly find themselves in the path of record-breaking wind gusts and storm surges, insurance companies are finding it difficult to forecast the extent of damages, relying solely on historic data.
Risk models traditionally used to determine the most vulnerable communities have increasingly proven to be unreliable because of the added intensity of the storms brought on by climate change, according to Fugate, who led the federal response to Hurricane Sandy in 2012.
While residents with federally-backed mortgages are required to purchase flood insurance if they live in 100-year floodplains — places where FEMA has determined are susceptible to being inundated with water — that same insurance is optional for homeowners living outside those communities.
“We're pricing risk below the point at which we change behavior,” Fugate said. “We're continuing to grow and build in areas that are vulnerable to these extreme events. And it's not that we can't have development. But we really need to think more about how we're building, not looking at the past.”
Impact from climate change
Scientists say it’s too early to determine the full extent of the impact climate change had on the intensity of Hurricane Ian.
Yet Dr. Ed Kearns, chief data officer at the Brooklyn-based non-profit First Street Foundation, said the size and speed of hurricanes are shifting. The storms are moving slower overland, dumping more rainfall, and triggering pluvial flooding.
Residents are getting caught off guard, in part, because FEMA flood maps that communities use to determine risk don’t incorporate the future impact from climate change and heavy rainfall.
"We don't want people to have this false sense of security like 'I don't need to get flood insurance because I don't live in a FEMA zone,'" Kearns said. “[FEMA flood maps] are entirely backward-looking, but it uses the last 30 years of rainfall records and calculates what's the chance of a heavy rainfall happening … now we know that climate change has got its thumb on a scale, and we're changing that signal now.”
Those changes were laid bare in inland communities that flooded throughout Florida, away from the coastlines, where residents report “paralyzing” levels of rainfall.
Political hurdles
Alan Harris, an emergency manager for Seminole County, north of Orlando, told the Washington Post he is seeing homes wash away in areas that have never flooded. Condo complexes one considered safe from floods have turned into lakes.
“It's important to remember that a lot of the losses to the FEMA program actually occur outside of the flood zones, because these flood zones are not just simple scientific engineering studies,” Chuck Watson, director of research and development at disaster modeler Enki Research, told Yahoo Finance. "They go through a political process as well before they're finally signed off on."
A lack of federal funding, red tape, and politics have all delayed flood maps from being updated for years, though, which is why Fugate said it’s time to upend the model FEMA has relied on for decades in order to avoid future disasters.
“These people, some of them have lost everything," he said. "Some didn't have insurance. They won't have insurance for floods. So we need to really go back and think about how we basically drive the investment in building infrastructure in communities that can withstand these storms in a way that we don't suffer these tremendous losses year after year.”
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Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita
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