The Challenge of Financial Recovery from Disasters: The Case of Florida Homeowners after Hurricane Michael

Tropical cyclones and hurricanes have caused the most damage of all weather-related disasters in the United States since 1980. The Wharton Risk Center, in partnership with the Resilience Action Fund, undertook a survey of homeowners who experienced Hurricane Michael in 2018 in order to identify the full range of costs that hurricanes impose, document the financial recovery of those who suffer property damage from a hurricane and explore determinants of financial resiliency. We found that the costs of hurricanes are wide ranging, extending beyond just property damage.

Read the report to learn more about the findings and survey methodology.

Community-Based Catastrophe Insurance: A model for closing the disaster protection gap

Insurance plays a critical role in recovery from natural disasters, but many households and small businesses do not have sufficient coverage to fund repair and rebuilding due to affordability constraints, limited risk awareness, lack of understanding of insurance, or behavioral biases in decision making. Local and regional leaders, other public officials, business leaders, and residents in the US need innovative new models of catastrophe insurance delivery to secure widespread coverage and help sustain communities following a catastrophic event. One such approach is community-based catastrophe insurance (CBCI).

Read more about CBCI in this report produced in partnership with Marsh & McLennan and Guy Carpenter.

Can Parametric Microinsurance Improve the Financial Resilience of Low-Income Households in the United States?

Parametric microinsurance has the potential to improve the financial resilience of lower-income households. Microinsurance refers to insurance policies that have low premiums and lower coverage limits and are designed for poorer populations. Parametric insurance rapidly pays out a set amount based on observable measures of the disaster, such as wind speed in a certain location. Since costly and time-consuming loss adjusting is not needed for parametric policies, the transaction costs are much lower, opening up the ability to provide lower-limit insurance policies, for which premium revenue would otherwise be insufficient to cover expenses.

Read the full report and the accompanying research. 

Flood Risk Management in the United States – Building flood resilience in a changing climate

This study, released by the Geneva Association in June of 2020, is focused on building resilience to floods in a changing climate. It points to the need for a paradigm shift from reacting to crises towards a risk-based, anticipatory, holistic and all-of-society approach to managing the potential impacts of catastrophes.

Read the full report and the accompanying research. 

The Role of Insurance in Coastal Adaptation: Workshop Findings

Climate change is increasing disaster risk in many coastal communities. The Wharton Risk Center has work underway exploring the role of risk transfer in promoting coastal climate adaptation. This project was launched with a workshop in December, 2019. Findings from the workshop are now available in a workshop report. The report offers a research and policy agenda for how risk transfer can address four adaptation priorities: (1) improving the recovery of low-income families, (2) protecting coastal ecosystems, (3) meeting community fiscal needs post-disaster, and (4) increasing investments in risk reduction.

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Climate Risk Solutions

Over the Summer of 2019, the Wharton Risk Management and Decision Processes Center, the Kleinman Center for Energy Policy, the Penn Program on Regulation, and the Faculty Senate at the University of Pennsylvania hosted a virtual ideation session to generate new policy-relevant and solution-oriented ideas for tackling one or more of three interrelated types of climate risk.

This report compiles the solutions from researchers across multiple schools, departments, and research centers at the university, highlighting the interdisciplinary nature of this project.

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The Mandatory Purchase Requirement: Origins and Effectiveness in Achieving NFIP Goals

After the Mandatory Purchase (MPR) went into effect in 1973, the number of communities enrolled in the National Flood Insurance Program (NFIP) grew rapidly, as did the number of properties with flood insurance coverage. That said, despite the MPR, an insurance coverage gap remains for many properties at risk from flooding.

This report examines the motivation behind creation of the MPR and the extent to which it is still meeting original policy goals.

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Assessing the Feasibility of Conducting Social Return on Investment Analyses for “Whole Community” Engagement Activities

Focusing on the city of Tulsa, Oklahoma, this study examines the feasibility of using social return on investment (SROI) methods to evaluate “whole community” and resilience-building activities at the local level.

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Financing Third Party Wildfire Damages: Options for Electric Utilities

Escalating wildfire risk and a unique legal regime threaten the financial health of California’s electric utilities, with consequences for customers, taxpayers, and shareholders. This report examines potential financing options for third-party wildfire damages, including a discussion of possible funding sources and mechanisms, and their distributional implications.

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Flood Risk and the U.S. Housing Market

Today, many homeowners are uninsured against flood damage. The lack of widespread take-up of flood insurance will not only impose financial strain on families but could have spillover effects in adjoining communities and may trigger foreclosures that hurt lenders. This paper describes the U.S. housing market’s exposure to flood risk and suggests directions for future research and action.

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The Emerging Private Residential Flood Insurance Market in the United States

Based on interviews with 63 market participants, external document review, and data analyses, the report characterizes the current state of the private market for residential flood insurance across the country, and identifies the main factors influencing the number and form of policies offered in this new market.

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TRIA After 2014: Examining Risk Sharing Under Current and Alternative Designs 

This report examines how modifications to the Terrorism Risk Insurance Act (TRIA) would impact insurers’ exposure and the distribution of losses across different stakeholders in the event of a large-scale terrorist attack.

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A Methodological Approach for Pricing Flood Insurance and Evaluating Loss Reduction Measures: Application to Texas

This report provides the first systematic analysis of the potential for private flood insurance to complement the NFIP so as to increase the number of homeowners who have proper flood coverage.

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Executive Summary