The report assesses current flood modeling practices and offers eight recommendations to improve how mitigation infrastructure is reflected in the catastrophe models that are used to set insurance prices. Titled Strengthening Incentives for Flood Risk Reduction in Catastrophe Modeling and Insurance: Recommendations for California Coastal Counties, it calls for improved practices ranging from better representation of phenomena such as atmospheric rivers in the models, greater access to federal flood insurance data, and making it clear in insurance premiums what savings could be achieved through risk reduction.
“Insurance could help California prepare for increasing flood risk by rewarding flood mitigation efforts with better pricing and availability,” said Scripps Oceanography research economist Tom Corringham, who co-authored the report with fellow Scripps research economist Denali Pinto. “We offer recommendations for filling critical data and policy gaps to link mitigation efforts with financial incentives, helping insurers and California’s communities realize the economic benefits of investing in resilience.”
Flood-related property damage in California is estimated to be $8 billion per year on average, according to the California Earthquake Authority. As a “super” El Niño strengthens through the winter, NOAA warns of more frequent, widespread, and deeper flooding in coastal communities due to a long-term trend of sea-level rise combined with a strong El Niño year.
According to a 2011 US Geological Survey study, an abnormal year featuring a catastrophic 1-in-1,000-year flood event in California could cause roughly $725 billion in property damage and business losses, more than $1 trillion in today’s dollars.
“To truly protect consumers in an age of climate change, insurance regulators must shift from a reactive stance of crisis management to agile, proactive leadership: anticipating disasters like coastal flooding before they strike so communities and markets can weather the storm,” said California Insurance Commissioner Ricardo Lara. “Strengthening Incentives for Flood Risk Reduction in Catastrophe Modeling and Insurance: Recommendations for California Coastal Counties—a collaboration of my Department’s climate experts, the California Ocean Science Trust, and researchers at UC San Diego—shows this leadership in action.”
Brett Sanders, Chancellor’s Professor at UC Irvine in Civil and Environmental Engineering, Urban Planning and Public Policy, along with Michael Beck, director of the UC Santa Cruz Center for Coastal Climate Resilience, and Tim Farrell of the National Association of Insurance Commissioners, served on the report’s Technical Steering Committee.
The report highlights the value of greater information exchange—including increasing baseline measurement, improving model inputs, and increasing transparency in how risk reduction is reflected in insurance outcomes. From quantifying statewide flood insurance protection gaps to developing comprehensive data sets of California flood-risk and defense structures to creating a California Public Flood Risk Model, the authors outlined key steps to make flood risk mitigation visible in the data, credible in the models, and transparent in the markets.
With the foundation this report builds, California can better prioritize mitigation across public investment, private risk-reduction decisions, insurance pricing, underwriting, and oversight. Taking these actions would position California as a national and global model for understanding flood risk, said OST leaders.
“Science must drive sound policy and decision-making along our coastlines,” said OST Executive Director Liz Whiteman. “This report gives state leaders actionable guidance from the flood science community to ensure insurance tools accurately capture the real-world value of both nature-based and traditional flood defenses.”
