+Sutter, Daniel, Building a Safe Port in the Storm: Private vs. Public Choices in Hurricane Mitigation (Hurricane Katrina - Gulf Coast Recovery, Gulf Coast Recovery Project, Mercatus Policy Series, Mercatus) (August 1, 2008) (PDF — 532K)
Disasters & the Law
UC Berkeley School of Law
6 entriesexpand all
+Sutter, Daniel, Insurance and Societal Vulnerability to Hurricanes (Gulf Coast Recovery Project, Working Papers, Mercatus Working Paper No. 08-11) (April 7, 2008) (PDF — 120K)
+Sutter, Daniel, The Market for Hurricane Mitigation: Regulatory or Market Failure? (Gulf Coast Recovery Project, Working Papers, Mercatus Working Paper No. 08-05) (April 3, 2008) (PDF — 118K)
"Losses from hurricane catastrophes have accelerated in recent years, with seven of the top nine hurricanes ranked by insured losses occurring during 2004 and 2005. Hurricane losses have affected the availability of insurance in coastal states and contributed to enormous growth in state residual wind markets. Of particular policy concern is the possibility that homeowners, businesses and insurance companies are not investing in the efficient amount of mitigation to reduce hurricane losses.
"This paper examines some of the potential barriers to the adoption of efficient mitigation and reviews specific state insurance regulation and legislation that impedes and encourages mitigation. Premium discounts and hurricane deductibles, which are waived if property owners invest in mitigation, provide incentives for mitigation, but mitigation discounts mandated by legislators potentially could represent disguised insurance subsidies. Irrationalities in decision-making such as low-probability event bias, myopia, and inertia might make it difficult for insurers to convince property owners to invest in mitigation. But this is not different in type from the problem entrepreneurs face in general in making consumers aware of the value of products. Restrictions on contractual mechanisms insurance companies can use to encourage mitigation, like requiring mitigation as a condition for renewal of coverage or funding mitigation after a disaster through long term loans or contracts, could prevent insurers from using effective incentives for mitigation, and could reduce the supply of insurance in coastal areas."—Abstract.
+Sutter, Daniel, Quality Assurance by the Public Sector: An Analysis of Building Code Enforcement (Gulf Coast Recovery Project, Working Paper No. 08-08) (April 2008) (PDF — 99K)
+United States Government Accountability Office (GAO),, Natural Hazard Mitigation and Insurance: The United States and Selected Countries Have Similar Natural Hazard Mitigation Policies but Different Insurance Approaches (Briefing to Congressional Requestors) (GAO-09-188R) (November 4, 2008) (PDF — 806K)
+United States Government Accounting Office (GAO), National Flood Insurance Program: Financial Challenges Underscore Need for Improved Oversight of Mitigation Programs and Key Contracts (June 2008) (GAO-08-437) (PDF — 2.27M)
"The number of federal flood insurance policies in force nationwide increased 36 percent from 1997 through 2006, but most homeowners at risk of flooding still lacked such insurance. While average insurance amounts (per policy) increased 78 percent from 1997 through 2006—consistent with rising home values—the average premium decreased 3 percent from 1997 through 2006, likely driven in part by the increase in policies sold in moderate- to low-risk areas. Conversely, loss amounts fluctuated by year, peaking at more than $17.7 billion in 2005. Seventy-nine percent of the funds paid out through NFIP from 1997 through 2006 were for hurricane-related claims, but the percentages in individual years varied widely (correlating with hurricane activity). Finally, the extent of claim payments attributed to repetitive loss properties (those with two or more claims in a rolling 10-year period) increased from 1997 through 2006, from $3.7 billion to nearly $8 billion, with the most significant increases resulting from the 2005 Gulf Coast hurricanes.
"Because of data limitations, GAO was not able to determine the actual number of properties acquired through FEMA mitigation programs, which are intended to minimize the damage and financial impact of floods. Information on completed mitigation projects (which encompass multiple properties) indicates that about one-third of properties approved for acquisition from 1997 to 2006 were acquired. However, these data are limited because they do not include a count of properties acquired in ongoing projects. Projects may take several years to complete, and FEMA does not report properties acquired until a project is complete. Further, FEMA collected property acquisition data (for completed projects) in an ad hoc manner because FEMA's grants management system lacks the capability to record acquisition data. As a result, FEMA cannot readily determine the extent to which flood-damaged and repetitive loss properties have been acquired through its mitigation programs.
"Lack of monitoring records, inconsistent application of procedures, and lack of coordination have diminished the effectiveness of FEMA monitoring of NFIP-related contracts. While federal internal control standards state that records should be properly maintained, FEMA did not consistently follow its monitoring procedures for preparing or maintaining monitoring reports and was unable to provide copies of the majority of monitoring reports GAO requested. Further, FEMA offices did not coordinate information and actions relating to contractor deficiencies and payments. In some cases, key officials were unaware of decisions on contractor performance. As a result, FEMA cannot consistently ensure adherence to contract requirements and lacks information critical for effective oversight of key contractors. Given the reliance of NFIP upon contractors, it is important that FEMA have in place adequate controls that are consistently applied to all contracts." — What GAO Found.