Encouraging Adaptation to Climate Change: Long-Term Flood Insurance

This paper from Resources for the Future (RFF), is focused on flooding impacts in the U.S. as a result of climate change, and in particular, the increases in severity and frequency of hurricanes. The authors examine potential issues that may arise from climate change given the rising population density in coastal regions and the expected volatility of weather patterns. The report also provides an overview of the risks and impediments to effective insurance markets in the face of climate change and outlines the need for and advantages of long-term insurance planning.

RFF recommends that Congress and the (current) Administration revise the 1968 established National Flood Insurance Program (NFIP), which covers more than $1.2 trillion of assets today, by moving from annual insurance contracts to long‐term policies tied to property. Guiding principles, should Congress choose to revise the NFIP, are also provided.

The authors argue that insurance premiums should reflect risk, but also that equity and affordability issues should be addressed. To do so, they recommend that any special treatment given to homeowners currently residing in hazard‐prone areas (such as low‐income uninsured or inadequately insured homeowners) should be funded through general public funding and not through artificial insurance premium subsidies. This principle reflects a concern for some residents in high‐hazard areas who will face large premium increases if the National Flood Insurance Program phases out subsidies. Homeowners being charged subsidized premiums would pay the full annual premium, but this cost to the homeowner could be offset by an insurance voucher those residents would receive (similar in concept to food stamps for groceries) reflecting the difference between the risk‐based premium and their subsidized premium.


Publication Date: December 2009

Authors or Affiliated Users:

  • Howard Kunreuther
  • Erwann Michel-Kerjan

Related Organizations:


Resource Category:

Resource Types:

  • Policy analysis/recommendations


Go To Resource