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Exam 6 > Govt.FloodSolutions > Flashcards

Govt.FloodSolutions Flashcards

1
Q

why was the Task Force on Flood insurance and relocation established?

A
  • to explore solutions for high risk areas and potential relocation strategies
  • prioritized engagement with indigenous communities
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2
Q

identify and briefly describe the 3 types of flooding

A
  • fluvial: water level overflows onto neighborhood land
  • pluvial: extreme rainfall
  • coastal: dry and low lying land submerged by seawater
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3
Q

identify 5 priority areas for action under EMS (Emergency Management Strategy)

A
  • enhance whole of society collaboration
  • improve understanding of disaster risks
  • increase focus on whole of society prevention and mitigation
  • enhance disaster response capacity
  • strengthen recovery efforts by building back better to minimize impacts of future disasters
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4
Q

define the term “risk” in the context of disasters

A

combination of likelihood and consequence of a specified hazard being realized

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5
Q

compare “hazard” and “risk”

A

flood is a hazard, but it doesnot become a risk unless assets (people, property) are affected by it
i.e. need consequences attached

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6
Q

identify and describe the 2 key drivers of Canada’s flood risk

A

1) population growth and urban development
- urban densification in flood prone areas contributes to flood risk
- urban centers are more prone to flood risks due to their locations on or near coastlines
2) climate change (HEAR)
- Heat induced risks
- Extreme precipitation
- Accelerated warming
- Risking sea levels

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7
Q

identify 3 problems pertaining to flood insurance in Canada

A

1) High cost
- especially for low income households
- recent flood events cause increased premiums an possibly withdrawal of coverage altogether
2) Low risk awareness
- information about floods, including flood maps may be unavailable
3) misaligned incentives
- taxpayer funded DFA programs contribute to a moral hazard
- because people may rely on that instead of buying insurance

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8
Q

fully describe the implications of low risk awareness on flood risks in Canada

A
  • no coverage: people may not purchase flood insurance if they are not aware of the risk
  • no coverage: people may think their standard homeowner’s policy covers flood when it doesn’t
  • insufficient coverage: people who do buy optional flood coverage may have insufficient protection
  • insufficient mitigation: people may be less likely to invest in property level flood protection
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9
Q

fully describe the moral hazards associated with misaligned incentives regarding flood risks in Canada

A

Generally,
- moral hazard is the expectation that governments will provide post disaster financial assistance regardless of poor decisions by individuals and communities on where to build
Particularly,
- HO: DFA doesn’t encourage risk reduction or insurance purchase
- communities: local governments and developers benefit from property sales and tax revenues but flood recovery costs fall largely on other levels of government
- regional and national: cost sharing of disaster recovery reduces incentive for risk reduction which may include expensive infrastructure

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10
Q

briefly describe the 4 concepts of FRM (Flood Risk Management)

A
  • alternative approach to conventional flood control measures
  • promotes the use of non structural mitigation measures to complement and enhance other types of mitigation
  • stakeholders include: govt/industry/communities/non gov organizations/individuals
  • an iterative process of: acting, monitoring, reviewing, adapting
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11
Q

regarding FRM, identify RRs of federal government

A

Role: more broad, Resp: specific task
- role: support provincial and local efforts to mitigate flood emergencies
- resp: monitor emergencies, financial assistance

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12
Q

regarding FRM, identify RRs of provincial/territorial government

A
  • regulate insurers
  • implement land use and flood risk management policies
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13
Q

regarding FRM, identify RRs of municipal government

A
  • lead local response and recovery during emergencies
  • invest in structural and non structural flood mitigation
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14
Q

regarding FRM, identify RRs of indigenous communities

A
  • develop community emergency management plans
  • address unique geography and social challenges in remote communities
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15
Q

regarding FRM, identify RRs of the insurance industry

A
  • provide flood insurance
  • offer overland flood endorsements
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16
Q

regarding FRM, identify RRs of non government groups

A
  • acts as initial responders during flood incidents
  • coordinate volunteers in recovery efforts
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17
Q

regarding FRM, identify RRs of communities and individuals

A
  • seek information to understand their property’s flood risk
  • purchase flood insurance
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18
Q

identify the necessary preconditions for success of a private flood insurance market

A

LIAP (liar with a p)
- Limit post disaster financial assistance from government to encourage flood mitigation investment
- Investments in public and private flood defenses
- Accurate and up to date flood mapping
- Public awareness of flood risk

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19
Q

identify prevention and mitigation measures an individual household can implement (benefit to cost 11:1)

A
  • install a backwater valve
  • having a basement sump pump
  • maintaining appropriate lot grading
  • clearing eaves troughs and extending downspouts
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20
Q

identify prevention and mitigation measures a community can implement (benefit to cost 6:1)

A
  • adopt climate resilient best practices
  • upgrade infrastructure
  • invest in natural infrastructure
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21
Q

identify prevention and mitigation measures that can be implemented on a national level (benefit to cost 7:1)

A
  • stricter building codes
  • improved flood risk information
  • investments in climate resilience
  • funding for watershed level mitigation projects
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22
Q

describe the concept of strategic relation

A

BRRR…COLD
- Buyout
- Remove assets from high risk properties
- Restore site to underdeveloped state
- repurpose site as green infrastructure

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23
Q

identify the inputs for the PS (Public Safety of Canada) approach for estimating flood damages

A

fec
- flood hazard: extent, magnitude, prob of occurrence
- exposure: people, infrastructure, property
- consequence: floodwater damage

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24
Q

identify the outputs for the PS (Public Safety of Canada) approach for estimating flood damages

A

risk
- predicted loss of people/infrastructure/property
- average annual loss from flooding
- return period level losses for residential properties in Canada

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25
Q

discuss the methodology for estimating flood hazards

A

Canada has 2 types of flood hazard information
1) local regulatory flood mapping
2) broad coverage models mainly used by insurance firms

  • regulatory mapping is very accurate but available only in selected areas
  • broad coverage models provide nationwide data
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26
Q

identify 3 advantages of broad coverage models

A
  • national wide coverage
  • provides flood depths for standard return periods
  • captures different flood types of fluvial, pluvial and coastal
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27
Q

discuss the methodology for estimating flood exposure

A
  • requires a comprehensive residential properties database
  • requires building attributes, informed risk and flood susceptibility
  • dataset was further broken down to individual households for consequence estimation
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28
Q

discuss the methodology for estimating consequences

A
  • relate flood depths in the models to estimate flood losses of residential properties
  • this is done using depth damage models
29
Q

identify the design characteristics for flood insurance programs

A

CAPP
- Choice: voluntary or compulsory
- Administration: role of govt vs role of private insurers
- Packaging: standalone product or bundled with other perils
- Premiums: risk based or uniform pricing

30
Q

describe the flood insurance program in Australia

A

1) Admin:
- government regulates the industry with minimal financial burden
- promotes private partnerships for risk management
2) Choice:
- voluntary both offering and uptake吸收
- varied availability based on flood risk levels
3) Packaging
- often bundled with other perils
- coverage and specific flood related perils vary by insurer
4) Premiums:
- risk based
- not regulated or subsidized by the government
- potentially high for highest risk properties
- retrofits recognized in premium calcs

31
Q

describe the flood insurance program in France

A

1) Admin:
- govt oversees CATNAT
- CATNAT supported by state owned CCR (that reinsures insurers)
- local govt are encouraged to adopt risk reduction plans
2) Choice:
- home insurance including catnat compulsory for property owners with a mortgage
- voluntary otherwise
3) Packaging:
- bundled
- catnat covering flood and other natural disasters is added to all property insurance contracts
4) Premiums:
- uniform pricing
- 12% surcharge on home insurance policies for natural disasters
- no incentive for property level mitigation

32
Q

describe the flood insurance program in UK

A

1) admin:
- Flood Re manages the flood insurance system
- Flood Re pool is a private sector entity accountable to the government
2) choice:
- not compulsory by law but often required by mortgage lenders for high risk properties
- voluntary for properties without a mortgage or low risk properties
- availability for high risk properties limited to those built prior to 2009
3) packaging:
- bundled with homeowner’s policy
- ceded to flood re when premiums exceed an affordability cap
4) premiums:
- reflect home values rather than risk level
- affordability is prioritized
- supplemented by a levy on all residential policies
- criticism is that high value properties are effectively subsided

33
Q

describe the flood insurance program in USA

A

1) admin:
- NFIP (National Flood Insurance Program) administered through FEMA (Federal Emergency Management Agency)
- some involvement from private insurers
2) choice:
- compulsory for homeowners with federally backed mortgages in flood prone areas
- voluntary else where
3) packaging:
- standalone
- discounts for communities implementing risk reduction measures
4) premiums:
- risk based
- some older government subsidized policies will transition to risk based

34
Q

identify considerations for guiding the development of flood policy options in Canada

A

1) minimize uncertainty
- invest in risk reduction in high risk areas to expand insurability
2) maximize market penetration and minimize adverse selection
- incentivize or require the purchase of flood insurance through bundling of flood coverage with other perils
3) design for affordability
- prioritize means testing to guide any public subsidy to households for flood insurance affordability
- end goal is risk based rates for everyone
4) minimize moral hazard
- implement minimum deductibles and avoid incentivizing new development in high risk areas

35
Q

describe the policy goals and objectives of Canada’s Task Force on flood insurance

A

AAAPRV
- Adequate and predictable compensation: settle claims quickly and accurately
- Affordable: inclusive and equitable for customers
- Available: for all types of floods and in all geo areas for all risk levels
- Participation: ensure premiums are affordable and provide incentives purchasing
- Risk based pricing: incentives risk reduction and minimizes moral hazards
- Value for money: reduce burden on public DFA, shift expenditures from recovery to mitigation and adaption

36
Q

describe the assumptions related to the 4 actuarial flood insurance models of the task force on flood insurance

A
  • total flood risk: 2.9B annual residential flood damage
  • organizational start up costs: not included but on going operational and maintenance expenses are included
  • lifespan of model: 25 years
  • climate change and inflation not considered
37
Q

4 conceptual models for flood actuarial analysis

A
  • flat cap high risk
  • tiered high risk pool
  • public insurance
  • public reinsurance
38
Q

how are the highest risk (top 10%) homeowners for flood risk identified?

A

AAL or prems >=0.1% of coverage

39
Q

would a flood premium of $250 for $500,000 of coverage be considered as high risk?

A

no because 250<500

40
Q

identify strategies for increasing affordability of flood insurance

A
  • premium caps
  • subsides based on income
41
Q

identify 2 items that are covered by premium load factors in flood insurance

A

any 2 of
- administrative and operational costs
- risk buffers
- living expenses

42
Q

what is cross subsiziation?

A

a transfer of some premium costs from high risk to low risk homeowners

43
Q

do high deductibles reduce participation?

A

yes, but high deductibles also encourage risk mitigation by homeowners

44
Q

define residual risk

A

the amount of financial risk left in the system once insurance options have been applied

45
Q

who pays the cost of residual risk in the context of residential flood insurance?

A

uninsured and underinsured homeowners

46
Q

how can low participation rates be improved in Canada where flood insurance is not mandatory?

A
  • awareness of risk through education
  • lower premiums
47
Q

identify 1 benefit of standardization of flood policies

A
  • simplified policy language
  • unified coverage types
  • bundling of perils for clairity
48
Q

describe the flat cap high risk pool model for flood insurance

A
  • a high risk pool with minimal intervention by government but with low premium cap and significant support from government
  • house holds at high risk of flooding included
    -no income based subsidies
  • 20$ levy on all policies
  • mandatory offer, optional purchase
49
Q

describe the tiered high risk pool model for flood insurance

A
  • high risk pool with added intervention by government, 5 levels of cap based on quantiles of reconstruction costs
  • households at high risk of flooding included
  • no income based subsidies because tiered premium caps
  • 40$ levy on all policies
  • mandatory offer, mandatory purchase with mortgage, optional without mortgage
50
Q

describe the public insurer model for flood insurance

A
  • a crown corporation (corporation owned by the government)
  • underwrites flood insurance with private insurance as the intermediary
  • higher premium cap (3k) with automatic government backstop
  • all households are included
  • income based subsidies is a sliding scale
  • $45 levy on all policies
  • mandatory offer and purchase via bundling with homeowner’s policy
51
Q

describe the public reinsurer model for flood insurance

A
  • a layered approach that builds on private and public used models
  • 1st layer is an optional purchase from private market at risk based rates at modest limit
  • 2nd layer is a mandatory purchase above modest limit but subsidized by crown corporation
  • no prem cap for 1st layer, prem cap of 3k for 2nd layer
  • all households included
  • no income based subsidies for 1 st layer, sliding scale for 2nd layer
  • $20 levy on all policies
  • mandatory offer, optional purchase for 1st layer
  • mandatory offer & purchase for 2nd layer via bundling with homeowner’s policy
52
Q

compare 4 flood insurance models on general orgnization

A

High-Risk Pools used for
- flat cap high risk pool
- tiered high risk pool (5 levels or tiers)
Crown Corporation used by
- public insurer (underwrites insurance through private insurers)
Public and Private elements used by
- public reinsurer (uses 2 layers)

53
Q

compare the 4 flood insurance models on who is included

A

include only high risk households:
- flat cap high risk
- tiered high risk
include all households
- public insurer
- public reinsurer

54
Q

what are 3 advantages of public reinsurer

A
  • flexibility in purchase offer
  • strong risk reduction incentives to homeowners
  • requires reduced funding but retains good coverage for major events
55
Q

compare the 4 flood insurance models on income based subsidies

A

no subsidies:
- flat cap high risk
- tiered high risk
- public reinsurer - 1st layer only
sliding scale subsidies:
- public insurer
- public reinsurer - 2nd layer only

56
Q

compare the 4 flood insurance models on cross subsidization

A

all models have a small levy (20/40/45/20)

57
Q

compare the 4 flood insurance models on participation assumptions

A

mandatory offer/optional purchase
- flat cap high risk
- public reinsurer - 1st layer only
mandatory offer/mandatory purchase with mortgage/otherwise optional purchase
- tiered high risk pool
mandatory offer/mandatory purchase (via bundling)
- public insurer
- public reinsurer -2nd layer only

58
Q

which flood insurance model contain significant residual risk?

A
  • flat cap high risk pool
  • tiered high risk pool
59
Q

which flood insurance model is mots costly to governments?

A

public insurer but cost per capita basis for high risk households is reasonable

60
Q

which flood insurance model provides the greatest flexibility and risk reduction incentives?

A

public insurer

61
Q

identify 3 reasons that the costs of flood risk may increase over time

A
  • inflation
  • climate change
  • population growth in flood prone areas
62
Q

briefly describe 2 potential flood de risking measures

A

1) restrict eligibility for the highest risk homeowners
- reduce costs
- but leaves many homeowners unprotected so requires significant government spending in a cat
2) strategic relocation
- reduces costs
- but is potentially disruptive and lengthy

63
Q

which flood insurance policy objective performs strongly for all flood insurance models?

A

availability performs strongly for all models because all provide comprehensive geographical coverage

64
Q

which flood insurance models perform strongly on 5 of the 6 flood insurance policy objectives?

A

public insurer
- performs strongly on all policy objectives except risk reduction
public reinsurer
- performs strongly on all policy objectives except affordability

65
Q

which flood insurance models perform weakly on at least 1 policy objective

A

flat cap high risk pool
- weak on participation because residual risk is high
- weak on value of money because it’s expensive for the government

66
Q

which flood insurance model has strong performance for the fewest number of policy objectives?

A

Tiered High Risk Pool
- performs strong only for availability

67
Q

which policy objective perform strongly for only1 model? Identify the model

A

Risk Reduction performs strongly only for Public Reinsurer model
- balance homeowner and government mitigation incentives
- encourages individual and community level risk reduction strategies

68
Q

review the table of policy objectives and flood insurance models

A
69
Q

briefly describe 4 key findings of the Task Force on Flood Insurance and Relocation

A

4 categories
1) relocation considerations
- relocation is powerful but disruptive
2) insurance considerations
- standardization of policy language
3) current flood risk
- total flood risk is currently estimated at 2.9B, about 1/3 of this total is concentrated in top1% of the riskiest homes
4) equity considerations
- affordability & education is key
- cultural connections of indigenous people to water and land must be respected

Exam 6 (58 decks)

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