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The purpose of this research study is to determine whether flood-damaged residences located in the USA are remaining unrepaired because of the lack of flood insurance coverage. Unrepaired flooded dwellings are subsequently being foreclosed with mortgage-insurance claims being paid to lenders. This paper aims to examine if weather events that cause flooding impact the losses suffered by mortgage insurers and homeowners.

Two fully modified least squares regression models are done using losses experienced by two mortgage insurance companies. The AM Best insurance rating information for a 16-year period or years 2002–2017 is used to study whether the loss ratios experienced by two companies underwriting private mortgage insurance (PMI) are statistically correlated to National Flood Insurance Program (NFIP) claim levels. The assumption is that higher flood insurance claims are a proxy for more severe weather events during a particular year which results in flooding that damage residences.

The NFIP claims coefficient is positive and significant for both companies being examined. This indicates that the more serious the flooding event during a specific year, the higher the losses experienced by the private mortgage insurer. The R² results for the regression models were 0.673–0.695. The income variable has a negative coefficient which was significant. It indicates that falling income lead to rising mortgage insurer losses. The NFIP variable was significant with a positive coefficient.

The mortgage insurance industry is dominated by several companies at any point in time. During the 16-year study period, some companies have become insolvent, merged with other companies or recently started underwriting mortgage insurance. One company was diversified writing multiple lines of property insurance. There were only two insurers with complete financial information for the specified study period.

There are currently five mortgage insurers operating in the USA. A serious flood event could cause the insolvency of some of these companies. This would reduce the competition existing in the default insurance market. The financial markets for real estate loans price mortgages based on the availability and the ability to secure mortgage insurance for high loan-to-value properties. There is federal mortgage insurance available for certain types of residential loans.

There are a limited number of insurers writing flood insurance. These companies can pick or reject dwellings and/or commercial properties to underwrite for insurance. The goal of phasing out insurance through the NFIP may prove impossible to achieve. A flood event without insurance would cause serious financial consequences to property owners, loan delinquencies and could depress the local economy for years. Competition from private mortgage insurers may intensify the adverse selection already being experienced by the NFIP. Private insurers would select the lower risk flood applications leaving the more risky insurance to be covered by the NFIP.

Prior research focused on financial variables impacting PMI and weather factors affecting flood insurance claims. Financial ratios published in the AM Best rating guide for the USA and Canada were used to examine whether or not PMI losses are indirectly affected by flooding events as measured by NFIP variable. Comparing two separate lines of insurance and their impact on each other has not been studied by prior researchers.

Insurance is widely regarded as a key adaptation option for climate change. Yet, the experience of the insurance sector in dealing with climatic hazards, particularly flooding, has been highly varied. Drawing from the experience of the US National Flood Insurance Program (NFIP), the purpose of this paper is to identify opportunities and challenges associated with using insurance as an adaptation strategy for climate change.

This article critically reviews the history and recent performance of the NFIP and considers lessons for climate change adaptation through insurance.

The US NFIP offers government‐subsidized flood insurance for firms and residences. Over its 40‐year history, the NFIP has struggled with financial instability and low levels of public participation in the program. The experience of the NFIP offers several lessons regarding the viability of insurance as an adaptation strategy: increasing insurance premiums to account for new climatic risks may mean that a growing segment of the population is unable or unwilling to purchase insurance, absent some other form of subsidization; educating the public on levels of risk and promoting appropriate risk mitigation are highly effective means for reducing damages from current and emerging weather‐related risks; and close public‐private cooperation is likely to be needed to prevent withdrawal of private insurers from high‐risk areas and to ensure that insurance coverage continues to be widely available.

Examination of past experience with insurance as a mechanism for climate adaptation offers lessons and insights that can inform development of effective strategies to address climate change.

The purpose of this paper is to understand how built environment professionals approach the valuation of flood risk in commercial property markets and whether insurance promotes mitigation in different insurance and risk management regimes, draw common conclusions and highlight opportunities to transfer learning.

An illustrative case study approach involving literature search and 72 interviews with built environment professionals, across five countries in four continents.

Common difficulties arise in availability, reliability and interpretation of risk information, and in evaluating the impact of mitigation. These factors, coupled with the heterogeneous nature of commercial property, lack of transactional data and remote investors, make valuation of risk particularly challenging in the sector. Insurance incentives for risk mitigation are somewhat effective where employed and could be further developed, however, the influence of insurance is hampered by lack of insurance penetration and underinsurance.

Further investigation of the means to improve uptake of insurance and to develop insurance incentives for mitigation is recommended.

Flood risk is inconsistently reflected in commercial property values leading to lack of mitigation and vulnerability of investments to future flooding. Improvements are needed in: access to adequate risk information; professional skills in valuing risk; guidance on valuation of flood risk; and regulation to ensure adequate consideration of risk and mitigation options.

The research addresses a global issue that threatens local, and regional economies through loss of utility, business profitability and commercial property value. It is unique in consulting professionals across international markets.

The purpose of this paper is to contrast the behavior of a US homeowner exposed to hurricane risk with government policies designed to limit hurricane losses. Owners limit these losses by selecting structural improvements or mitigation and wind and flood insurance.

The paper uses mitigation costs, hurricane probabilities, and insurance premiums to frame rational cost‐minimizing choices for the homeowner.

First, even though nationwide hurricane damage costs are large, the cost‐minimizing response for an individual property owner may be to buy no mitigation or structural improvements, no flood insurance and minimal wind insurance, as probabilities of strong hurricanes striking particular locations are extremely low. Second, additional insurance is a less costly defense than structural improvement, even under much higher insurance premiums and hurricane strike probabilities. Third, federally subsidized flood insurance may reduce the effectiveness of government programs encouraging structural mitigation.

The last few years were underscored by the catastrophic damages of Hurricanes‐Katrina, Ike and Wilma. Enormous costs suffered by the public and private sectors could have been avoided with greater mitigation by homeowners. This paper examines the financial incentives for such mitigation. Those incentives are examined in a previously untested framework.

The purpose of this paper is to elaborate the stated goals of the National Flood Insurance Program (NFIP) and then demonstrate that in practice those goals have not been achieved, and at significant cost to US taxpayers.

The objectives are achieved by describing statements of the NFIP and the legislation behind it, and then providing an analysis of the NFIP in practice in the wake of Hurricane Katrina.

The NFIP flood insurance primarily shelters lending institutions rather than flood victims. At subsidized rates, premiums covered little of the Katrina‐based claims, and future premiums cannot realistically be expected to repay off the resulting debt to the US Treasury.

If the findings are accepted they lead one to conclude that government attempts to complete incomplete markets are fraught with inherent and exceptional difficulties.

The NFIP should be eliminated, allowing private insurance to be offered when profitable in floodplains and allowing property‐owners to make informed choices as to residence and development.

Attention to general disaster relief and the controversies surrounding private insurers and homeowners policies following Katrina have overshadowed the NFIP's federal flood insurance failings. This paper contributes to that relative void.

Flood damage to uninsured single-family homes shifts the entire burden of costly repairs onto the homeowner. Homeowners in the United States and in much of Europe can purchase flood insurance. The Netherlands and Asian countries generally do not offer flood insurance protection to homeowners. Uninsured households incur the entire cost of repairing/replacing properties damaged due to flooding. Homeowners’ policies do not cover damage caused by flooding. The paper examines the link between personal bankruptcy and the severity of flooding events, property prices and financial condition levels.

A fully modified ordinary least squares (FMOLS) regression model is developed which uses personal bankruptcy filings as its dependent variable during the years 2000 through 2018. This time-series model considers the association between personal bankruptcy court filings and costly, widespread flooding events. Independent variables were selected that potentially act as mitigating factors reducing bankruptcy filings.

The FMOLS regression results found a significant, positive association between flooding events and the total number of personal bankruptcy filings. Higher flooding costs were associated with higher bankruptcy filings. The Home Price Index is inversely related to the bankruptcy dependent variable. The R-squared results indicate that 0.65% of the movement in the dependent variable personal bankruptcy filings is explained by the severity of a flooding event and other independent variables.

The severity of the flooding event is measured using dollar losses incurred by the National Flood Insurance program. A macro-case study was undertaken, but the research results would have been enhanced by examining local areas and demographic factors that may have made bankruptcy filing following a flooding event more or less likely.

The paper considers the impact of the natural disaster flooding on bankruptcy rates filings. The findings may have implications for multi-family properties as well as single-family housing. Purchasing flood insurance generally mitigates the likelihood of severe financial risk to the property owner.

Natural flood insurance is underwritten by the federal government and/or by private insurers. The financial health of private property insurers that underwrite flooding and their ability to meet losses incurred needs to be carefully scrutinized by the insured.

Prior studies analyzing the linkages existing between housing prices, natural disasters and bankruptcy used descriptive data, mostly percentages, when considering this association. The study herein posits the same questions as these prior studies but used regression analysis to analyze the linkages. The methodology enables additional independent variables to be added to the analysis.

Recent years saw a paradigm shift from ex post (reactive) to ex ante (proactive) approaches (e.g. insurance) to disaster risk financing for building resilience of communities in developing countries. To facilitate adoption, the approaches should be adapted so that they can be technically feasible and culturally desirable to the local context. This paper aims to report an exploratory study to elaborate the existing arrangements to deal with the impacts of disaster and the potential to shift to a more proactive disaster risk financing in Indonesia.

A series of stakeholder engagement activities in Semarang and Solo, Indonesia was conducted to ascertain the existing arrangements for disaster risk financing at local government level, the challenges/barriers to the adoption of insurance, education and policies to facilitate the transformation from reactive to proactive process. Thematic analysis was applied to transcribed conversations during interviews, focus groups and workshops. Identification of emerging issues/themes was also guided by the researchers’ notes during the events, and facilitated by qualitative analysis software, Atlas Ti®. This was complemented by an analysis of regulations and documents provided by the local stakeholders.

The local governments heavily rely on contingency fund, which is not enough and often significantly delayed to fund recovery and reconstruction of public infrastructure. The use of insurance is limited in both public and private sectors, particularly in the majority of low-income communities. Various barriers and challenges were identified under several categories, namely, institutional, cultural, affordability, lack of awareness and knowledge, insurance arrangement process and lack of trust. The findings also suggest that improving insurance education should involve multiple stakeholders, and both formal and informal routes should be pursued.

The research fills the gap of knowledge in disaster risk financing in the context of developing countries, specifically in local governments and communities in Indonesia. The findings may be replicable for other developing countries with low adoption of ex ante financial instruments for dealing with the impacts of disaster.

This paper aims to examine the risks caused by recent climate change in China and their effects on the insurance industry. China has experienced more extreme events (floods, droughts and storms) in recent years than ever before, causing the insurance industry to pay increasing attention to the negative consequences of climate change.

This paper reports on the frequency and severity of extreme risks caused by climate change. It examines what Chinese insurers are doing to address climate change risks and discusses opportunities for expanding their role in providing relief against natural disasters.

Being professional risk managers, Chinese insurance companies need to identify and assess the impacts of climate change to play a more prominent role in a market offering great future opportunity.

The Chinese insurance industry has not been actively involved in the management of increasing risks due to climate change. This paper will discuss the reason for this limited involvement and the ways for the insurance industry to overcome obstacles, enabling it to capitalize on future opportunities.

This paper aims to examine the approach of UK institutional funds to considering flood risk to property investments in the light of their fiduciary duty, the widespread floods in 2007 and 2010 and the predicted increase in future incidence due to climate change. It explores the due diligence process and the challenges to investment decision-making and to property valuation. The case is made for further research to establish the extent of UK investment property potentially at risk from flooding, the degree of risk exposure and the way the risk is translated into valuations.

A comprehensive literature review informed the design of interviews with senior managers in major investment funds, their professional advisers and other stakeholder representatives, including environmental consultants, valuers, solicitors, lenders and the insurance industry. Case studies illustrate how the due diligence process is used to identify risks, inform purchase decisions and devise mitigation and management actions.

Property represents about 4 per cent of investments managed in the UK, but there is no clear picture of where and how much could be at risk of flooding. There is a common false assumption among investors that risk levels are unlikely to change and a reluctance to expose an otherwise hidden problem.

Property is an important diversification asset in investment portfolios, underpinning individual pension, insurance and savings plans. Prior research indicated flood risk to commercial investment property was under-researched; a need for awareness raising; and for guidance relevant to investors and their professional advisers.

The UK has experienced a number of flood events in recent years, and the intensity and frequency of such events are forecast to further increase in future due to changing climatic conditions. Accordingly, enhancing the resilience of small and medium‐sized enterprises (SMEs) – which form an important segment in a society – to flood risk, has emerged as an important issue. However, SMEs often tend to underestimate the risk of flooding which tends to have a low priority in their business agenda. The purpose of this paper is to undertake an investigation of adaptation to the risk of flooding considering community‐level measures, individual‐level property protection, and business continuity and resilience measures.

A total of four short case studies were conducted among SMEs to identify their response to flood risk, and what measures have been undertaken to manage the risk of flooding.

It was observed that SMEs have implemented different property‐level protection measures and generic business continuity/risk management measures, based on their requirements, to achieve a desired level of protection.

SMEs are likely to positively respond to property‐level adaptation following a post‐flood situation. It is important that information such as costs/benefits of such measures and different options available are made accessible to SMEs affected by a flood event.

Implementation of property‐level adaptation measures will contribute towards the long term adaptation of the existing building stock to changing climatic conditions.

The paper contributes towards policy making on flood risk adaptation and SME decision making, and informs policy makers and practitioners.