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Project Information

Project Information


Risk-Based Methods for Insurance Premiums of Negatively Elevated Structures in the National Flood Insurance Program


Project Scope:

Ad ad hoc committee will conduct a study of pricing negatively elevated structures in the National Flood Insurance Program. Specifically, the committee will: 

·        
Review current NFIP methods for calculating risk-based premiums for negatively elevated structures, including risk analysis, flood maps, and engineering data.
·         Evaluate alternative approaches for calculating “full risk-based premiums” for negatively elevated structures, considering current actuarial principles and standards.
·         Discuss engineering, hydrologic, and property assessment data and analytical needs associated with fully implementing full risk-based premiums for negatively elevated structures.
·         Discuss approaches for keeping these engineering, hydrologic, or property assessment data updated to maintain full risk-based rates for negatively elevated structures.
·         Discuss feasibility, implementation, and cost of underwriting risk-based premiums for negatively-elevated structures, including a comparison of factors used to set risk-based premiums.

 

 

 

 

Status: Completed

PIN: DELS-WSTB-13-03

Project Duration (months): 18 month(s)

RSO: Linn, Anne

Topic(s):

Earth Sciences
Engineering and Technology
Math, Chemistry, and Physics



Geographic Focus:

Committee Membership

Committee Post Date: 11/22/2013

David T. Ford - (Chair)
David Ford Consulting Engineers

David T. Ford (chair) is president of David Ford Consulting Engineers in Sacramento, California. Dr. Ford is an internationally recognized expert in hydrologic, hydraulic, and water resources engineering, and flood and floodplain management. He has over 35 years of project management experience, including 23 as owner and president of David Ford Consulting Engineers, Inc., and 12 as a senior hydraulic engineer at the U.S. Army Corps of Engineers’ Hydrologic Engineering Center. He has served as a consultant to the U.S. Army Corps of Engineers, the National Weather Service, USAID, state government agencies, the United Nations, the World Bank, and engineering firms worldwide. He has prior NRC committee experience, most recently with the Committee on Levees and the National Flood Insurance Program. He has served on the faculty of the University of California and California State University. Dr. Ford received his B.S., M.S., and Ph.D. degrees in civil engineering from the University of Texas. He is a registered professional engineer in 12 states.
Ross B. Corotis
University of Colorado Boulder

Ross B.Corotis, NAE, is the Denver Business Challenge Professor of Engineering at the University of Colorado. With a background in structural mechanics and stochastic vibrations, Dr. Corotis' primary research interests are in the application of probabilistic concepts to civil engineering problems, where he has expanded traditional studies of structural reliability into risk and decision modeling for the built environment. He is currently working on using a first-order reliability approach to estimate seismic risk loss and prioritize mitigation, and on using generalized methods of uncertainty to evaluate risk and reliability. He is conducting research on regional decision models based on disaster data, and on the development of reliable confined masonry design techniques for seismic regions. Recent completed projects include a comparison of the reasons behind differing damages in Haiti, Chile and New Zealand after similar earthquakes; risk communication for seismic retrofit; and the development of a risk-based decision methodology for transportation facility design. Dr. Corotis received his B.S., M.S., and Ph.D., all in civil engineering, from the Massachusetts Institute of Technology.
Wei Du
CoreLogic Spatial Solutions

Wei Du is principal scientist and chief hydrologist at CoreLogic Spatial Solutions, where he has led research on flood risk and hazards and development of methods and analytic tools. He has over 25 years of experience in hydrologic engineering, hazard risk assessment, and geospatial technology. During the past decade, he led a consulting team to work with FEMA on many flood hazard related projects (including FEMA Map Modernization and RiskMap) and on the production of Flood Insurance Rate Maps. He has developed analytical tools on classifying hazard risk and conducted research on flood risk associated with riverine flooding, coastal storm surge, flash flooding, and basement flooding. Under his leadership, CoreLogic has created the most detailed national hydrologic datasets, including the national catchment slope dataset and national 100-year flood elevation surface dataset. Working closely with Swiss Re, Dr. Du has provided catastrophic flood loss analyses for many insurance clients. He has a B.S. in hydrologic engineering, an M.S. in hydrologic and environmental science, and a Ph.D. in geography from Clark University.
Clive Q. Goodwin
FM Global

Clive Q. Goodwin is assistant vice president and manager for natural hazard peril underwriting at FM Global Insurance Company. In this position, he manages worldwide underwriting of wind, flood, and collapse perils. The work capitalizes on FM Global’s engineering knowledge of these hazards to improve clients’ knowledge of risk and their insurance terms and conditions. Recently, Mr. Goodwin represented FM Global in a collaboration with the U.S. Army Corps of Engineers, FEMA, and other agencies to highlight concerns about the aging inventory of levees and the importance of changing U.S. policy on levee risk. He is a chartered engineer, a member of the Institution of Mechanical Engineers, and a former member of the Industry Leaders Council of the American Society of Civil Engineers. Mr. Goodwin holds a B.S. in mechanical engineering and metallurgy from the University of Manchester, U.K., and a Certified Diploma in accounting and finance.
Larry Larson
Association of State Floodplain Managers

Larry Larson is director emeritus and senior policy advisor for the Association of State Floodplain Managers (ASFPM), where he coordinates national flood and water resources policy development with state and federal agencies, the Administration, and other policy groups and organizations. His 50+ year career has been devoted to flood hazard and water resources management. He is the co-developer of ASFPM’s No Adverse Impact approach to community development and has authored numerous white papers and articles. For decades, Larson has been a leader in developing national policy on the wise and sustainable use of floodplains. Prior to joining ASFPM, he spent 30 years with the Wisconsin Department of Natural Resources managing flood loss reduction, dam safety, wetlands, and other programs, and 5 years with the California Department of Water Resources on the design and construction of large dams, aqueducts, and other water projects. Larson holds a B.S. in civil engineering from the University of Wisconsin and is a registered professional engineer in Wisconsin and California.


Howard Leikin
Independent Consultant

Howard Leikin is retired after decades with the Federal Insurance Administration and FEMA. At FEMA he provided executive leadership and direction for the insurance and floodplain management aspects of the National Flood Insurance Program. He also coordinated insurance marketing, communication, and outreach strategies to reduce losses from flooding and other perils. In 2003, Mr. Leikin transferred to the Department of the Treasury, where he served as the deputy director for the newly enacted Terrorism Risk Insurance Program. His responsibilities included establishing a framework for the program, developing policies and procedures for administering claims and for sharing losses among the federal and private sectors, and developing program regulations. He was detailed back to FEMA for five months in 2005 to assist with policy and implementation of the NFIP in the aftermath of Hurricane Katrina. Mr. Leikin holds a B.S. in applied mathematics from SUNY Stony Brook, an M.S. in operations research from George Washington University, and was designated an Associate in Risk Management by the Insurance Institute of America.
Martin W. McCann
Jack R. Benjamin & Associates

Martin W. McCann is president of Jack R. Benjamin and Associates, Inc., and is also a consulting professor of civil and environmental engineering at Stanford University. At Stanford, he is a former chair of the National Performance of Dams Program, which created a national network to report dam safety incidents and to archive this information for use by the geotechnical and seismic engineering communities. Dr. McCann’s professional background and research have focused on probabilistic hazards analysis, including hydrologic events, risk assessment, reliability and uncertainty analysis, and systems analysis. He has been a consultant to several government and private sector groups in the U.S. and abroad, and has served on three NRC committees, including the Committee on Integrating Dam and Levee Safety and Community Resilience. Dr. McCann received a B.S. from Villanova University and an M.S. and Ph.D. from Stanford University.
Laura A. McLay
University of Wisconsin-Madison

Laura A. McLay is an associate professor of Industrial and Systems Engineering at the University of Wisconsin, Madison. Her research interests are in the field of operations research, with a particular focus on discrete optimization with application to homeland security and emergency response problems. Dr. McLay is president of Women in Operations Research and the Management Sciences, a forum of the Institute for Operations Research and the Management Sciences (INFORMS), and president-elect of the INFORMS Section on Public Programs, Service and Needs. She is a department editor for IIE Transactions, and an associate editor for Risk Analysis and International Transactions on Operational Research. She received a B.S. and M.S. in general engineering, and a Ph.D. in industrial engineering, all from the University of Illinois at Urbana-Champaign.


Erwann Michel-Kerjan
University of Pennsylvania

Erwann Michel-Kerjan teaches in the graduate program at the Wharton School of the University of Pennsylvania and is the managing director of the Wharton Risk Management and Decision Processes Center. His research focuses on how to better manage and finance extreme events (e.g., terrorism, natural disasters) and to strengthen resilience through business and policy innovation. Since 2008, he has chaired the OECD Secretary-General Board on Financial Management of Catastrophes, which advises the 34 member countries on these issues. He was a founding member of the World Economic Forum’s Global Agenda Council on Leadership and Innovation for Reducing Risks from Natural Disasters and co-led the G20 Paris initiative under the patronage of then-President Sarkozy. Dr. Michel-Kerjan has coauthored several books, including Seeds of Disaster, Roots of Response: How Private Action Can Reduce Public Vulnerability (Cambridge University Press), The Irrational Economist: Making Decisions in a Dangerous World (PublicAffairs) and At War with the Weather (MIT Press). The latter, coauthored with , with Howard Kunreuther, received the prestigious Kulp-Wright award for the most influential book on risk management. He received his Ph.D. in economics and finance at the Ecole Polytechnique in Paris, France.
Lindene Patton
Zurich Insurance Group Ltd

Lindene Patton is chief climate product officer for Zurich Insurance Group, which provides both primary insurance and reinsurance. She is responsible for policy and risk management related to climate change. Her research focuses on how risk management systems are affected by natural catastrophes, and on alternative financing models that reflect actual exposure as well as future climate change. She is a member of the World Economic Forum’s Global Advisory Council on Measuring Sustainability and Advisory Board on Sustainability and Competitiveness. Ms. Patton serves on numerous government and non-governmental advisory boards, including the Executive Secretariat of the U.S. National Climate Assessment Development and Advisory Committee. She recently coauthored the book Climate Change and Insurance (2012). She is an attorney licensed in California and the District of Columbia and an American Board of Industrial Hygiene Certified Industrial Hygienist. She holds a B.S. in biochemistry from the University of California, Davis, a Master’s of Public Health from the University of California, Berkeley, and a J.D. from Santa Clara University School of Law.
Patricia Templeton-Jones
Wright National Flood Insurance Company

Patricia Templeton-Jones is chief operating officer of Wright National Flood Insurance Company, the largest provider of flood insurance in Florida and the United States. She is the current president of the Flood Insurance Servicing Companies Association of America and a member of the Write Your Own Coalition. The Write Your Own Program of the National Flood Insurance Program allows participating property and casualty insurance companies to write and service the standard flood insurance policy in their own names. Ms. Templeton-Jones recently served as NFIP flood coordinator for Wright Flood, and chaired the Institute for Business and Home Safety and The WYO Marketing Committee. With over 25 years of experience in the insurance industry, she is an outspoken advocate of the flood insurance program and of education about flood insurance.
Susan E. Voss
Voss Consulting, LLC

Susan E. Voss is Vice President/General Counsel for American Enterprise Group, Inc. an insurance company specializing in health care insurance products and services. Prior to beginning her work at American Enterprise Group in November 2013, she was a consultant in the areas of life insurance and annuity regulation. From 2005 to 2013, she was the Iowa Insurance Commissioner, where she led efforts to coordinate work with state and federal emergency management teams to assist Iowans with flood-related property issues, including mitigation of homeowner damage and flood insurance issues. An integral member of the Iowa Insurance Division, she assisted on an “after action plan” committee formed by Governor Branstadin 1993, which made recommendations on risk mitigation, insurance education and outreach, and state emergency management plans. She provided similar leadership services following the Iowa floods of 2008. She was a representative of the state of Iowa as well as president of the National Association of Insurance Commissioners. Ms. Voss has also represented the United States and Iowa in meetings with foreign regulators and officials regarding insurance operations in China, South Korea, Chile, Ecuador, and Germany. She received her B.A. from Simpson College and her J.D. from the Gonzaga University School of Law.

Disclosure of Conflicts of Interest

Disclosure of Conflict of Interest: Lindene E. Patton

In accordance with Section 15 of the Federal Advisory Committee Act, the "Academy shall make its best efforts to ensure that no individual appointed to serve on [a] committee has a conflict of interest that is relevant to the functions to be performed, unless such conflict is promptly and publicly disclosed and the Academy determines that the conflict is unavoidable." A conflict of interest refers to an interest, ordinarily financial, of an individual that could be directly affected by the work of the committee. As specified in the Academy's policy and procedures (http://www.nationalacademies.org/coi/index.html), an objective determination is made for each provisionally appointed committee member whether or not a conflict of interest exists given the facts of the individual's financial and other interests and the task being undertaken by the committee. A determination of a conflict of interest for an individual is not an assessment of that individual's actual behavior or character or ability to act objectively despite the conflicting interest.

We have concluded that for this committee to accomplish the tasks for which it was established its membership must include among others, at least one person who has practical experience with and expertise in current methodologies that insurance companies use to assess risks associated with climate change.

To meet the need for this expertise and experience, Ms. Lindene Patton is proposed for appointment to the committee even though we have concluded that she has a conflict of interest because she is employed by a U.S. subsidiary of the Zurich Insurance Group, Ltd, which has U.S. subsidiaries that sell flood insurance whose financial interests could be affected by the outcome of the study. The U.S. subsidiary that employs Ms. Patton does not underwrite or administer National Flood Insurance Program policies.

As her biographical summary makes clear, Ms. Patton has developed expertise in insurance industry methods for assessing risks associated with climate change that are not currently accounted for in FEMA actuarial methods. Ms. Patton’s extensive experience in the insurance industry and her technical expertise related to climate change are critical to the ability of the committee to fulfill its task of examining alternative approaches for calculating full risk-based premiums. We believe that Ms. Patton can serve effectively as a member of the committee and that the committee can produce an objective report, taking into account the composition of the committee, the work to be performed, and the procedures to be followed in completing the work.

After an extensive search, we have been unable to find another individual with the equivalent experience and technical expertise as Ms. Patton who does not have a similar conflict of interest. Therefore, we have concluded that this potential conflict is unavoidable.


Disclosure of Conflict of Interest: Patricia Templeton-Jones

In accordance with Section 15 of the Federal Advisory Committee Act, the "Academy shall make its best efforts to ensure that no individual appointed to serve on [a] committee has a conflict of interest that is relevant to the functions to be performed, unless such conflict is promptly and publicly disclosed and the Academy determines that the conflict is unavoidable." A conflict of interest refers to an interest, ordinarily financial, of an individual that could be directly affected by the work of the committee. As specified in the Academy's policy and procedures (http://www.nationalacademies.org/coi/index.html), an objective determination is made for each provisionally appointed committee member whether or not a conflict of interest exists given the facts of the individual's financial and other interests and the task being undertaken by the committee. A determination of a conflict of interest for an individual is not an assessment of that individual's actual behavior or character or ability to act objectively despite the conflicting interest.

We have concluded that for this committee to accomplish the tasks for which it was established its membership must include among others, at least one person who has practical experience with and expertise in methodologies for calculating premiums for flood insurance policies within the National Flood Insurance Program (NFIP).

To meet the need for this expertise and experience, Ms. Templeton-Jones is proposed for appointment to the committee even though we have concluded that she has a conflict of interest because she is President of the Flood Insurance Servicing Companies Association of America and a senior executive at Wright National Flood Insurance Company, which sells flood insurance under the NFIP and whose financial interests could be affected by the outcome of the study.

As her biographical summary makes clear, Ms. Templeton-Jones has over 25 years of experience with the NFIP, including changes in policies and practices for writing and servicing flood insurance for the program. She also has substantial expertise in property and flood insurance underwriting, including measuring risk exposure and determining premiums. This past experience and her current expertise are critical to the ability of the committee to fulfill its task of reviewing NFIP methods for calculating premiums. We believe that Ms. Templeton-Jones can serve effectively as a member of the committee and that the committee can produce an objective report, taking into account the composition of the committee, the work to be performed, and the procedures to be followed in completing the work.

After an extensive search, we have been unable to find another individual with the equivalent experience and current technical expertise as Ms. Templeton-Jones who does not have a similar conflict of interest. Therefore, we have concluded that this potential conflict is unavoidable.

Events



Location:

Arnold and Mabel Beckman Center
100 Academy Way, Irvine, CA 92617
Event Type :  
-

Registration for Online Attendance :   
NA

Registration for in Person Attendance :   
NA


If you would like to attend the sessions of this event that are open to the public or need more information please contact

Contact Name:  Anita Hall
Contact Email:  ahall@nas.edu
Contact Phone:  202-334-1945

Agenda
This meeting is closed in its entirety
Supporting File(s)
-
Is it a Closed Session Event?
Yes

Closed Session Summary Posted After the Event

The following committee members were present at the closed sessions of the event:

David Ford
Ross Corotis
Wei Du
Clive Goodwin
Larry Larson
Howard Leikin
Martin McCann
Laura McLay
Erwann Michel-Kerjan
Lindene Patton
Patty Templeton-Jones

The following topics were discussed in the closed sessions:

Committee analysis
Draft report

The following materials (written documents) were made available to the committee in the closed sessions:

none

Date of posting of Closed Session Summary:
August 25, 2014
Publication(s) resulting from the event:

-


Location:

Denver Airport Marriott at Gateway Park
16455 40th Circle, Aurora, CO 80011
Meeting Room - Long's Peak

Event Type :  
-

Registration for Online Attendance :   
NA

Registration for in Person Attendance :   
NA


If you would like to attend the sessions of this event that are open to the public or need more information please contact

Contact Name:  Anita Hall
Contact Email:  ahall@nas.edu
Contact Phone:  202-334-1945

Agenda
3:30 Discussion of the USACE risk analysis method (Nathan Snorteland, USACE, Risk Management Center)

4:15 Open session ends
Supporting File(s)
-
Is it a Closed Session Event?
Yes

Closed Session Summary Posted After the Event

The following committee members were present at the closed sessions of the event:

David Ford
Wei Du
Marty McCann
Howard Leikin
Ross Corotis

The following topics were discussed in the closed sessions:

Analysis of methods for setting risk-based insurance premiums

The following materials (written documents) were made available to the committee in the closed sessions:

None

Date of posting of Closed Session Summary:
August 15, 2014
Publication(s) resulting from the event:

-


Location:

Keck Center
500 5th St NW, Washington, DC 20001
Event Type :  
-

Registration for Online Attendance :   
NA

Registration for in Person Attendance :   
NA


If you would like to attend the sessions of this event that are open to the public or need more information please contact

Contact Name:  Anita Hall
Contact Email:  ahall@nas.edu
Contact Phone:  202-334-1945

Agenda
Monday, May 12

9:00 Welcome and introductions (David Ford, Chair)

9:05 Flood risk management in North Carolina (John Dorman,NC Floodplain Mapping Program)

9:45 Questions (Committee)

10:00 Break and end of open session


Tuesday, May 13

9:00 Evaluation of the NFIP rate setting process (Patrick Brockett, University of Texas)

Questions (All)

10:00 Break

10:15 Discussion with the committee (Andy Neal, FEMA)

11:15 open session ends
Supporting File(s)
-
Is it a Closed Session Event?
Yes

Closed Session Summary Posted After the Event

The following committee members were present at the closed sessions of the event:

David Ford
Ross Corotis
Wei Du
Clive Goodwin
Larry Larson
Howard Leikin
Martin McCann
Laura McLay
Erwann Michel-Kerjan
Lindene Patton
Patricia Templeton-Jones
Susan Voss

The following topics were discussed in the closed sessions:

FEMA methods for floodplain mapping and rate setting
Committee analysis
Draft report
Plans for the next meeting

The following materials (written documents) were made available to the committee in the closed sessions:

* information on the cost per mile of a flood study
* links to FEMA watershed risk reports
* FEMA report "Analysis and Update of National Flood Hazard Layer Demographics and NFIP Policy and Claims Data"
* USACE depth-damage relationships
* link to Society of Actuaries publication on credibility theory and the credibility formula used by FEMA to weight depth damage relationships
* examples of FEMA elevation flood frequency relationships

Date of posting of Closed Session Summary:
May 14, 2014
Publication(s) resulting from the event:

-


Location:

Keck Center
500 5th St NW, Washington, DC 20001
Event Type :  
-

Registration for Online Attendance :   
NA

Registration for in Person Attendance :   
NA


If you would like to attend the sessions of this event that are open to the public or need more information please contact

Contact Name:  Anita Hall
Contact Email:  ahall@nas.edu
Contact Phone:  202-334-1945

Agenda
Committee on Risk-Based Methods for Insurance Premiums of Negatively-Elevated Structures in the National Flood Insurance Program
Keck Center, Room 103
500 Fifth Street, Washington, D.C.
March 6, 2014

Preliminary Agenda

3:15 Welcome and introductions (David Ford, Chair)

3:20 Answers to committee questions (Andy Neal, FEMA)

Clarification of committee tasks
* definition of “full risk-based premiums” (Task 2)
* “discuss feasibility, implementation, and cost” (Task 5)

Review of FEMA issues of concern

Other issues and discussion (All)

5:00 Adjourn

Supporting File(s)
-
Is it a Closed Session Event?
Yes

Closed Session Summary Posted After the Event

The following committee members were present at the closed sessions of the event:

David Ford
Ross Corotis
Wei Du
Clive Goodwin (via telecon)
Larry Larson
Howard Leikin
Martin McCann
Laura McLay
Erwann Michel-Kerjan
Lindene Patton
Patricia Templeton-Jones
Susan Voss

The following topics were discussed in the closed sessions:

Biggert-Waters implementation
Draft text and report outline
Plans for completing the report
Plans for the next meeting

The following materials (written documents) were made available to the committee in the closed sessions:

Information about FEMA's methods for setting rates

Date of posting of Closed Session Summary:
March 28, 2014
Publication(s) resulting from the event:

-


Location:

Keck Center
500 5th St NW, Washington, DC 20001
Event Type :  
-

Registration for Online Attendance :   
NA

Registration for in Person Attendance :   
NA


If you would like to attend the sessions of this event that are open to the public or need more information please contact

Contact Name:  Anita Hall
Contact Email:  ahall@nas.edu
Contact Phone:  202-334-1945

Agenda
Meeting Room - Keck 201

10:15 Introductions and plans for the afternoon (David Ford, Chair)

10:30 Opening remarks from FEMA (5 minutes) (David Miller, FEMA)

FEMA request for the study (30 minutes) (Andy Neal and Tom Hayes, FEMA)
* Problem the agency is trying to solve (e.g., context, why now)
* What are negatively elevated structures and where are they located?
* Issues of concern
* What the agency does and does not want from the study
* How the report will be used
* Audience for the report

Discussion of the statement of task (Committee and FEMA)

11:30 National Flood Insurance Program “101” (30 minutes) (Joe Cecil, FEMA)
* Brief history
* Major provisions of the program
* Biggert-Waters Flood Insurance Reform Act of 2012
* Rate setting method and structure

Questions (All)

12:15 Working lunch

1:15 Overview of FEMA’s Flood Insurance Rate Maps (45 minutes) (Doug Bellamo and Joe Cecil, FEMA)
* Information on the maps and studies and how it is collected
* Base flood elevations and their accuracy
* Zones and their relation to rates
* Use of the maps for insurance ratings

Questions (All)

2:15 Overview of FEMA’s rate-setting procedures for negatively-elevated structures (45 minutes) (Andy Neal and Tom Hayes, FEMA)
* How rates are set
* Issues of concern

Questions (All)

3:15 Break

3:45 How a private company sets rates for negatively-elevated structures (15 minutes) (Clive Goodwin, FM Global)

4:00 Discussion: other issues related to FEMA and the tasks (All)

4:30 Open session ends
Supporting File(s)
-
Is it a Closed Session Event?
Yes

Closed Session Summary Posted After the Event

The following committee members were present at the closed sessions of the event:

The following committee members were present for closed session:

D. Ford
R. Corotis
W. Du
C. Goodwin
R. Hoyt
L. Larson
H. Leikin
M. McCann
L. McLay
E. Michel-Kerjan
L. Patton
P. Templeton-Jones

The following topics were discussed in the closed sessions:

The following topics were discussed in the closed session:

NRC committee process
Composition and balance of the committee
Statement of task, study goals, and key issues
Report outline
Committee assignments
Plans for the next meeting




The following materials (written documents) were made available to the committee in the closed sessions:

None.

Date of posting of Closed Session Summary:
January 22, 2014
Publication(s) resulting from the event:

-

Publications

  • Publications having no URL can be seen at the Public Access Records Office