Failure to Prepare for Extreme Weather Costs Billions Each Year
Mark Gaffigan, the managing director for the U.S. Government Accountability Office’s National Resources Environmental Team, said the financial risks from two federal insurance programs create a “significant fiscal exposure.” He said there are four areas where the government could limit this exposure: disaster aid, infrastructure ownership, property and crop insurance, and providing technical assistance to state and local governments.
Gaffigan noted that the annual costs to run the federal government’s crop insurance program have more than doubled, and the flood insurance program has a $24 billion debt. In 2012, the federal flood insurance program had property coverage of over $1.2 trillion, and the crop insurance program covered $120 billion in crops, a four-fold increase in the crop insurance program since 2003.
Gaffigan said the federal government should start fully budgeting for the costs associated with weather events, which often come from outside the normal budgeting process. In addition to finding ways to addresses the risks, he also advised the federal government to improve access for state and local governments to the best available climate-related information.
“Taxpayers are bearing the burden of this increasingly unbudgeted risk and associated loss costs,” said Lindene Patton, chief climate product officer for Zurich Financial Services.
Patton said the U.S. is increasingly reliant on disaster recovery funding to respond to extreme weather events, and is underinvested in resilience.
A 2010 paper by J. David Cummins concluded that the federal government’s share of unfunded disaster response costs for weather-related disasters could grow to between $1.2 trillion and $5.7 trillion over the next 75 years.
“From a practical perspective, funding resilience is a fundamentally wiser investment than spending on disaster relief and recovery,” Patton said.
A Business Continuity Institute study found that 40 percent of businesses affected by extended periods of severe weather never recovered or reopened. The same study found that extreme weather is the cause of 45 percent of supply chain disruptions.
Without risk reduction action by government and insurers, the unbudgeted disaster management costs can be expected to continue on an upward trajectory, she said.
Patton said one way for Congress to improve resilience is by expanding the Resilience STAR pilot program.
Caitlin Durkovich, assistant secretary for infrastructure protection at DHS, said extreme weather disrupts the security of the nation by diverting attention from counterterrorism efforts and straining the government’s resources.
“To achieve infrastructure resilience, owners and operators must be able to minimize the disruption to essential services provided to our communities,” Durkovich said. “And when a disruption occurs, ensure essential services and functions are brought back to full operations as quickly as possible.”