Stopping the flow 67
problem of flood risk. New home construction continues to take place on
flood-prone land. What’s more, ‘The spatial shift in flood risk areas as a
result of climate change is expected to disproportionately impact homes in
deprived areas, notably in multicultural urban neighbourhoods and areas
dominated by increasingly struggling homeowners’ (Rözer & Surminski
2020) – in other words, risks are expected to increase more for people who
are least able to afford a risk-based premium. Christophers (2019) thus reasonably predicts that, ‘Precisely because a meaningful long-term strategy
to address the underlying problems of flood risk management has not been
developed now, those problems will continue to mount. In 2039, the necessary decisions will be tougher, and the necessary actions even more difficult’
(p. 23). People will still face high flood risk and they will still be unable to
afford a market price for flood insurance.
However, even if these aspirations are realised, even in partial form,
the ‘problem’ of flow persists – it is just displaced. If risk-based premiums
become unaffordable, people will not purchase flood insurance where they
can avoid doing so (because mandatory purchase requirements don’t exist
or apply, or aren’t widely enforced). Disaster aid, paid out of public coffers,
still goes to help flooded areas rebuild. That flow comes from taxpayers,
who send resources to recoup what are then even higher uninsured losses.
Other flows, in the form of donations from charitable organisations and
non-profits, also go to those in need. And recurrent issues of equity and
prudent land use are anyway not vanquished by the elimination of crosssubsidies in flood insurance, through these or any other plans. Even if
algorithms can discern the haves from the have-mores (the have-nots – the
people who cannot acquire property – are entirely excluded), the pressures
of risk-based pricing will unevenly affect policyholders, who have different
resources available to take on mitigating action or to absorb any consequent hit to their property values. Even if a free market with unsubsidised
and competitively derived insurance rates ‘signals’ risk, the pressures to
build new housing and foster local economic growth, as well as the interventions of the extremely powerful real estate and finance industries in both
countries, will throw up continued dilemmas related to where or whether to
build, with more and more areas facing intensifying flood risks due in part
to further climate change.
The elimination of the cross-subsidy flow could also lead to the creation
of new flows. Where catastrophic losses bankrupt private insurers or lead
them to ‘defensively underwrite’ and drop policies in the riskiest areas, we
should expect some demand for new or expanded public backstops (indeed,
this has taken place in the American West following the catastrophic wildfire seasons of the last few years). And where high risks and high premiums threaten property values, as well as community tax bases reliant on
value-assessed property (typical of the United States in particular), then
new forms of economic insecurity are created for individuals and communities, which may lead to demands for a tighter weaving of the social safety net
problem of flood risk. New home construction continues to take place on
flood-prone land. What’s more, ‘The spatial shift in flood risk areas as a
result of climate change is expected to disproportionately impact homes in
deprived areas, notably in multicultural urban neighbourhoods and areas
dominated by increasingly struggling homeowners’ (Rözer & Surminski
2020) – in other words, risks are expected to increase more for people who
are least able to afford a risk-based premium. Christophers (2019) thus reasonably predicts that, ‘Precisely because a meaningful long-term strategy
to address the underlying problems of flood risk management has not been
developed now, those problems will continue to mount. In 2039, the necessary decisions will be tougher, and the necessary actions even more difficult’
(p. 23). People will still face high flood risk and they will still be unable to
afford a market price for flood insurance.
However, even if these aspirations are realised, even in partial form,
the ‘problem’ of flow persists – it is just displaced. If risk-based premiums
become unaffordable, people will not purchase flood insurance where they
can avoid doing so (because mandatory purchase requirements don’t exist
or apply, or aren’t widely enforced). Disaster aid, paid out of public coffers,
still goes to help flooded areas rebuild. That flow comes from taxpayers,
who send resources to recoup what are then even higher uninsured losses.
Other flows, in the form of donations from charitable organisations and
non-profits, also go to those in need. And recurrent issues of equity and
prudent land use are anyway not vanquished by the elimination of crosssubsidies in flood insurance, through these or any other plans. Even if
algorithms can discern the haves from the have-mores (the have-nots – the
people who cannot acquire property – are entirely excluded), the pressures
of risk-based pricing will unevenly affect policyholders, who have different
resources available to take on mitigating action or to absorb any consequent hit to their property values. Even if a free market with unsubsidised
and competitively derived insurance rates ‘signals’ risk, the pressures to
build new housing and foster local economic growth, as well as the interventions of the extremely powerful real estate and finance industries in both
countries, will throw up continued dilemmas related to where or whether to
build, with more and more areas facing intensifying flood risks due in part
to further climate change.
The elimination of the cross-subsidy flow could also lead to the creation
of new flows. Where catastrophic losses bankrupt private insurers or lead
them to ‘defensively underwrite’ and drop policies in the riskiest areas, we
should expect some demand for new or expanded public backstops (indeed,
this has taken place in the American West following the catastrophic wildfire seasons of the last few years). And where high risks and high premiums threaten property values, as well as community tax bases reliant on
value-assessed property (typical of the United States in particular), then
new forms of economic insecurity are created for individuals and communities, which may lead to demands for a tighter weaving of the social safety net