"The fact that official Washington is finally addressing the concept of some areas being too vulnerable to insure is noteworthy...."
"For decades, lawmakers and federal agencies in Washington, D.C., have resisted taking harsh action to pull federal insurance funding from especially vulnerable areas, even as climate change made a mockery of 100-year projections.... Now, in the wake of disasters including the deadly Kentucky floods and Hurricane Ian, official Washington is openly wrestling with what to do about the hundreds of thousands of people who are living in areas that climate change is making too risky to inhabit."
"If large numbers of communities are rendered undesirable because of their climate, local and regional real estate markets could tank. Expensive public infrastructure like water treatment systems and roads could be abandoned or become obsolete as people relocate. Heavy taxpayer spending is likely. Yet many experts say that proactively steering people away from places climate change is making nonviable will seem a bargain compared with the costs of rebuilding in the shadow of past and future disasters, floods and droughts."
"... as climate change makes disasters more frequent and severe, a once-taboo strategy known as "managed retreat" is getting more serious consideration in Congress and the federal government."
"Human beings are terrible at assessing risk," Kralicek (the emergency manager for Tulsa and Tulsa County) said. "We're awful at it. Which is why things like casinos do so well."
Recent federal policy changes might help to limit those losses. But until there's a wholesale rethink of how -- and where -- cities, towns and counties develop, there will be more hardship.
"The piper is gonna come call, and at some point you got to pay," Kralicek added. "And you just got to figure out who's paying."
Making people pay
One way to push people to make rational decisions is to force them to pay more if they don't.
In October 2021, FEMA rolled out its long-awaited revamp to the federal flood insurance program, known as Risk Rating 2.0. The effort aims to align insurance premium pricing with the actual flood risk homes face. FEMA hopes doing so will limit losses to the chronically indebted, taxpayer-funded federal flood insurance program and also signal to would-be homeowners that some places face significant danger.
"There is no greater risk-communication tool than a pricing signal. When we distort the price, we distort their understanding of risk," said Wright, the former FEMA flood insurance chief.
Risk Rating 2.0: Equity in Action
FEMA Flood Insurance Risk Rating 2.0
FEMA is updating the National Flood Insurance Program's (NFIP) risk rating methodology through the implementation of a new pricing methodology called Risk Rating 2.0.
FEMA is committed to building a culture of preparedness across the nation. Purchasing flood insurance is the first line of defense against flood damage and a step toward a quicker recovery following a flood.
Since the 1970s, rates have been predominantly based on relatively static measurements, emphasizing a property's elevation within a zone on a Flood Insurance Rate Map (FIRM).
This approach does not incorporate as many flooding variables as Risk Rating 2.0. Risk Rating 2.0 is not just a minor improvement, but a transformational leap forward. Risk Rating 2.0 enables FEMA to set rates that are fairer and ensures rate increases and decreases are both equitable.
FEMA is building on years of investment in flood hazard information by incorporating private sector data sets, catastrophe models and evolving actuarial science.
With Risk Rating 2.0, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables. These include flood frequency, multiple flood types -- river overflow, storm surge, coastal erosion and heavy rainfall -- and distance to a water source along with property characteristics such as elevation and the cost to rebuild.
Currently, policyholders with lower-valued homes are paying more than their share of the risk while policyholders with higher-valued homes are paying less than their share of the risk. Because Risk Rating 2.0 considers rebuilding costs, FEMA can equitably distribute premiums across all policyholders based on home value and a property's unique flood risk.
Rates can increase 18% per year.