Come Rain or Shine: Evidence on Flood Insurance Purchases in Florida
In the U.S., flood insurance is provided essentially through the National Flood Insurance Program (NFIP), a public-private program established in 1968. In the past 10 years, the program has radically expanded to cover $1.1 trillion in assets today. This paper provides a detailed analysis of the largest flood insurance sample ever studied by focusing on the state of Florida, which accounts for 40 percent of the entire NFIP portfolio. We study the demand for flood insurance with a database of more than 7.5 million flood policies-in-force for the years 2000-2005, and all the claims filed in Florida during that period. We answer four questions: What are the characteristics of the buyers of flood insurance? What types of contracts (deductibles and coverage levels) are purchased? Where and when are claims paid and to what extent does mitigation work? How are prices determined and how much does NFIP insurance cost? Given the recent significant increase in the cost of catastrophes worldwide and the debate about the role that insurance can play to enhance adaptation to climate change, the responses to these questions shall be of interest to other countries too.
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- Howard C. Kunreuther & Erwann O. Michel-Kerjan, 2007. "Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge," NBER Working Papers 12821, National Bureau of Economic Research, Inc.
- Browne, Mark J & Hoyt, Robert E, 2000. "The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
- Warren Kriesel & Craig Landry, 2004. "Participation in the National Flood Insurance Program: An Empirical Analysis for Coastal Properties," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 405-420.
- Dwight Jaffee & Howard Kunreuther & Erwann Michel-Kerjan, 2008. "Long Term Insurance (LTI) for Addressing Catastrophe Risk," NBER Working Papers 14210, National Bureau of Economic Research, Inc.
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