A study, published in February 2021, conducted by First Street Foundation, a non-profit organization occupied in flood risk analyses in the U.S., suggests that the full extent of flood risk is currently underestimated.
The research focuses on the U.S. where the conditions have deteriorated over the past years due to extreme phenomena. These include hurricanes and wildfires that have impacted a large part of the population. Nevertheless, the study suggests that flooding is the number one hazard when it comes to infrastructure with its financial impact being more than $155 billion during the past decade.
The flood risk assessment can be better understood if we compare the probable financial costs and the correspondent premium insurance rates. The research team found that there is a substantial difference between those rates and the actual economic loss of a potential flooding incident to the properties. In particular, focusing on the residences that have a substantial risk of damage due to flooding (defined as a 1% probability of flooding annually), it is deduced that the expected losses per year are $4,419 per residence. On the contrary, the average premium cost for the National Flood Insurance Program (NFIP) is slightly less than $1,000. Hence, the potential financial cost is underestimated by more than $3400 per residence with the accumulated annual loss being $20.8 billion. The insurance program has a debt of more than $20 billion showing that the number of contracts and/or the cost of premium rates is not high enough. "That (The debt situation) tells you you're not collecting enough premiums, but the long-term game is to have zoning and building codes that minimize risk. You can't just depend on insurance," Sandra Knight, a former FEMA administrator and a senior research engineer at the University of Maryland's Center for Disaster Resilience, stated.
Another report issued by First Street Foundation in 2020, suggests that there are, in total, 14.6 million structures that belong to the high flood risk category. What is worth mentioning is that about 40% of those structures are located outside of FEMA's Special Flood Hazard Areas (SFHA), hence, their owners are not aware of the potential risk are not obliged to acquire insurance.
Moreover, FEMA has not yet derived flood maps for all regions in the U.S., a fact that may underestimate even more the number of flood-prone infrastructure. In addition, due to the impact of climate change, some maps may be outdated and need re-assessment. Nevertheless, FEMA is planning for a new system (Risk Rating 2.0) that will define the flood insurance rate and will utilize state-of-the-art means to derive the risk of every property.
When it comes to details about the flood risk evaluation, the current study suggests that the findings probably underestimate the infrastructure damage since not all properties within a flood-prone area were assessed. "Our numbers are large ... but it's not encompassing all properties that are inside the Special Flood Hazard Area, or many other residential properties like condos, apartment buildings and other larger buildings," Matthew Eby, the founder and executive director of First Street Foundation, said.