Magazine article The American Conservative

Subsidizing Disaster: As Seas Rise, Why Is Government Promoting Coastal Development?

Magazine article The American Conservative

Subsidizing Disaster: As Seas Rise, Why Is Government Promoting Coastal Development?

Article excerpt

Sometimes it seems like everything is underwater. In Galveston, Texas, sea levels have risen by more than a foot since 1983. So-called "superstorms" like Hurricanes Sandy and Katrina have caused hundreds of billions in damage and lost economic output.

While the media are quick to pin the blame for these events on climate change--and some experts do believe, for example, that higher temperatures are providing "fuel" for hurricanes in the North Atlantic--both the Intergovernmental Panel on Climate Change and the National Oceanic and Atmospheric Administration have been reluctant to endorse such claims. But if that sounds reassuring, it shouldn't.

Climate change is expected to increase storm intensity over the long term, and sea-level rise will leave coastal areas more vulnerable even to ordinary storms. And the IPCC did find an increase in damage from storms--concluding that "Economic growth, including greater concentrations of people and wealth in periled areas and rising insurance penetration, is the most important driver of increasing losses."

In other words, storms are doing more damage not because they are more powerful but because more people are living in storm-prone areas. Fortunately, there's something policymakers can do to reduce the damage: they can stop subsidizing population growth in high-risk areas.

About one-third of Americans--more than 100 million people--now live in low-lying coastal regions. Analysis by the Risky Business Project forecasts that between $48.2 billion and $68.7 billion worth of existing coastal property in the Southeast alone will be below sea level by 2050. Parts of Louisiana are expected to be at least 4.3 feet below sea level by the end of the century.

It may seem odd for people to be moving into these vulnerable areas. But one major explanation for this trend is simple: government is paying for it.

The National Flood Insurance Program, for example, offers policies to people in flood-prone areas. The NFIP was created in 1968 to address a gap in the private market--insurers weren't confident that they could accurately assess the risks of flooding and were concerned about handling many claims at once when disaster struck. But even today, with much better modeling tools and sophisticated global markets that can spread risks far and wide, the NFIP still holds 5 million policies. This is because the NFIP charges rates so far below the levels that actuaries would recommend--in some areas, only 45 percent of the full level of risk--that private companies cannot compete.

State governments have also gotten in on the game. Every Gulf Coast state operates some form of state-backed insurance program for wind; Florida and Louisiana have programs to insure against other risks as well. In Texas, for example, residents of coastal counties can obtain wind coverage from the Texas Windstorm Insurance Association (TWIA), a state-created nonprofit. TWIA is meant to be an insurance provider of last resort, but its rates are substantially below what would be actuarially sound and do not vary geographically in the same ways that private insurance rates do. Since 2000, the number of TWIA policies has more than quintupled, from 50,000 to around 275,000.

People should be free to live where they want, provided they are willing to bear the risks of doing so. …

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