GAO Report: Substantial Insurance Risks

A GAO report from March of this year about climate instability suggests that climate instability poses threats to two major government insurance programs -- the National Flood Insurance Program and the Federal Crop Insurance Program. The reports says, "Taken together, private and federal insurers paid more than $320 billion in claims on weather-related losses from 1980 to 2005. Claims varied significantly from year to year—largely due to the effects of catastrophic weather events such as hurricanes and droughts—but have generally increased during this period. The growth in population in hazard-prone areas and resulting real estate development have generally increased liabilities for insurers, and have helped to explain the increase in losses. Due to these and other factors, federal insurers’ exposure has grown substantially. Since 1980, NFIP’s exposure quadrupled, nearing $1 trillion in 2005, and program expansion increased FCIC’s exposure 26-fold to $44 billion.

"Major private and federal insurers are both exposed to the effects of climate change over coming decades, but are responding differently. Many large private insurers are incorporating climate change into their annual risk management practices, and some are addressing it strategically by assessing its potential long-term industry-wide impacts. The two major federal insurance programs, however, have done little to develop comparable information. GAO acknowledges that the federal insurance programs are not profit-oriented, like private insurers. Nonetheless, a strategic analysis of the potential implications of climate change for the major federal insurance programs would help the Congress manage an emerging high-risk area with significant implications for the nation’s growing fiscal imbalance."