CLIMATE CHANGE

Better Management of 

Exposure to Potential 

Future Losses Is 

Needed for Federal 

Flood and Crop 

Insurance

Report to Congressional Requesters

October 2014

GAO-15-28

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-15-28, a report to 

congressional requesters

October 2014

CLIMATE CHANGE

Better Management of Exposure to Potential Future 

Losses Is Needed for Federal Flood and Crop 

Insurance

Why GAO Did This Study

The May 2014 National Climate 

Assessment indicates that the 

frequency and/or severity of many 

weather and climate extremes may 

increase with climate change. Public 

and private property insurers can bear 

a large portion of the financial impact 

of such weather-related losses. In the 

public sector, federal insurance 

includes NFIP, managed by FEMA, 

and the federal crop insurance 

program, managed by RMA.

GAO was asked to review climate 

change’s effect on insurers. This report 

examines (1) how federal and private 

exposure to losses has changed since 

GAO’s 2007 report on the subject, and 

what is known about how climate 

change may affect insured and 

uninsured losses; (2) how public 

insurers are preparing for climate 

change, and any challenges they face;

and (3) how private insurers are 

preparing for climate change and any 

challenges they face. GAO reviewed 

20 studies, examined federal and 

private sector data on exposure to 

losses from 2000 to 2013, reviewed 

agency documents, and interviewed 

agency officials and a nonprobability 

sample of eight insurers and 

reinsurers.

What GAO Recommends

GAO recommends that FEMA and 

RMA take additional steps to 

encourage flood and crop insurance 

policyholders to adopt building and 

agricultural practices that reduce longterm risk and federal exposure to 

losses. FEMA agreed with GAO’s

recommendation, and RMA neither 

agreed nor disagreed with GAO’s

recommendation.

What GAO Found

Since GAO’s 2007 report on flood and crop insurance, exposure growth in 

hazard-prone areas has increased losses, and climate change and related 

increases in extreme weather events may further increase such losses in coming 

decades. Scientific and industry studies GAO reviewed generally found that 

increasing growth and property values in hazard-prone areas have increased

losses to date and that climate change may compound this effect. From 2007 

through 2013, data from the Federal Emergency Management Agency (FEMA) 

and the Risk Management Agency (RMA) show that exposure to potential losses

for insured property grew from $1.3 trillion to $1.4 trillion (8 percent). According to 

industry data, private sector exposure to such loss grew from $60.7 trillion to 

$66.5 trillion (10 percent) from 2007 through 2012. Federal exposure to 

uninsured loss also increased by 46 percent over this period, based on a 2013 

analysis by the Congressional Research Service. According to the studies GAO 

reviewed, climate change may substantially increase losses by 2040 and 

increase losses from about 50 to 100 percent by 2100.

FEMA and RMA have taken some steps to better understand and prepare for 

climate change’s potential effects under the National Flood Insurance Program 

(NFIP) and the federal crop insurance program by, for example, commissioning 

climate change studies. However, both agencies face challenges that may limit 

their ability to minimize long-term federal exposure to climate change. For 

example, because of the short-term nature of insurance (i.e., contracts typically 

estimate and communicate risk of property losses for the 1-year term of a policy),

FEMA and RMA face a challenge in encouraging policyholders to reduce their 

long-term exposure to climate change risks. Specifically, flood insurance 

policyholders who build to NFIP standards—which are based on current flood 

risk and not on long-term risks—may unintentionally increase their vulnerability to 

climate change as sea-level rises. Also, while federal law prohibits crop 

insurance from covering losses due to a farmers’ failure to follow good farming 

practices, such as various irrigation methods, some of these practices maintain

short-term production but may inadvertently increase the vulnerability of 

agriculture to climate change through increased erosion and inefficient water use. 

A recent executive order directed federal agencies to reform policies that may, 

perhaps unintentionally, increase the vulnerability of economic sectors or 

communities to climate change. Without encouraging NFIP and crop insurance 

policyholders to adopt building and agricultural practices that reduce long-term 

risk, FEMA and RMA may send policyholders signals that unintentionally 

encourage their vulnerability to climate change, counter to the direction of the 

executive order, which could exacerbate federal exposure to losses.

Many private insurers and reinsurers have taken steps since 2007 to better 

understand and prepare for climate change effects and related challenges,

including participating in industry climate change surveys, and issuing reports 

that identify and assess climate change risks and trends in weather-related 

losses. According to industry officials, they can manage their exposure to climate 

change and related challenges through risk-based premiums, reinsurance, and 

other practices, although estimating weather-related risks still includes elements 

of uncertainty.

View GAO-15-28. For more information, 

contact J. Alfredo Gómez at (202) 512-3841 or 

gomezj@gao.gov.
Page i GAO-15-28 Climate Change

Letter 1

Background 5

Growth in Federal and Private Sector Exposure Has Increased 

Losses to Date, and Climate Change May Increase Losses in 

Coming Decades 10

Public Insurers Have Begun Taking Steps to Prepare for Climate 

Change Effects, but Challenges May Limit Their Ability to 

Manage Future Exposure 16

Many Private Insurers and Reinsurers Have Identified and 

Assessed Climate Change Risks, but Preparing for Long-Term 

Effects Is Challenging 25

Conclusions 30

Recommendations for Executive Action 31

Agency Comments and Our Evaluation 31

Appendix I Objectives, Scope, and Methodology 36

Appendix II Comments from the U.S. Department of Agriculture 39

Appendix III Comments from the U.S. Department of Homeland Security 41

Appendix IV GAO Contact and Staff Acknowledgments 43

Tables

Table 1: Federal Exposure to Potential Loss from Insured 

Property, 2007 to 2013, in 2014 Dollars 11

Table 2: Estimated Percentage Change in Inflation-Adjusted U.S. 

Hurricane Insured and Uninsured Losses Potentially 

Attributable to Climate Change Based on Peer-Reviewed 

Studies Conducted Since 2007 14

Contents
Page ii GAO-15-28 Climate Change

Figure

Figure 1: Disaster Declarations 2000-2013, Federal Flood 

Insurance and Federal Crop Insurance 2013 Exposure by 

County 12

Abbreviations

ARS Agricultural Research Service

Biggert-Waters Act Biggert-Waters Flood Insurance Reform Act of 

2012

DHS Department of Homeland Security

DRF Disaster Relief Fund

FAIR Fair Access to Insurance Requirements

FEMA Federal Emergency Management Agency

NAIC National Association of Insurance Commissioners

NFIP National Flood Insurance Program

NOAA National Oceanic and Atmospheric Administration

NRC National Research Council

PRISM Parameter-elevation Regressions on Independent 

Slopes Model

RMA Risk Management Agency

RMS Risk Management Solutions

SFHA special flood hazard area

USDA U.S. Department of Agriculture

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-15-28 Climate Change

441 G St. N.W.

Washington, DC 20548

October 29, 2014

Congressional Requesters

The impacts and costs of certain weather disasters—such as floods, 

drought, and hurricanes—will increase in significance as previously rare 

events become more common and intense due to climate change, 

according to the United States Global Change Research Program’s May 

2014 National Climate Assessment.1 While the magnitude and extent of 

future climate change effects are uncertain, climate change presents a 

significant financial risk to the federal government in many areas. As a 

result of these risks and the nation’s fiscal condition, in February 2013, 

we added Limiting the Federal Government’s Fiscal Exposure by Better 

Managing Climate Change Risks to our list of areas at high risk to fraud, 

waste, abuse, and mismanagement, or most in need of transformation.2

The uncertain and potentially large losses associated with weatherrelated events are among the biggest risks that property insurers face. 

The property and casualty segment of insurance, which spans both the 

public and private sectors, bears a large portion of the financial impact of 

weather-related losses. In the public sector, federal insurance programs 

include the National Flood Insurance Program (NFIP), administered by 

the Federal Emergency Management Agency (FEMA) within the U.S. 

Department of Homeland Security, which makes flood insurance available 

to residential property owners and businesses, and the federal crop 

insurance program, administered by the Risk Management Agency 

(RMA) within the U.S. Department of Agriculture (USDA), which protects 

farmers against financial losses caused by drought, floods, and other 

natural disasters, among other things. In addition, the federal government 

 1

Melillo, Jerry M., Terese (T.C.) Richmond, and Gary W. Yohe, eds., Climate Change 

Impacts in the United States: The Third National Climate Assessment. U.S. Global 

Change Research Program (Washington, D.C.: U.S. Government Printing Office, 2014). 

Thomas R. Karl, Jerry M. Melillo, and Thomas C. Peterson, eds., Global Climate Change 

Impacts in the United States (Cambridge University Press: 2009). The 2014 report 

summarizes the impacts of climate change on the United States, now and in the future. A 

team of several hundred experts guided by a 60-member Federal Advisory Committee 

produced the report, which was extensively reviewed by the public and experts, including 

federal agencies and a panel of the National Academy of Sciences.

2

GAO, High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 2013). 
Page 2 GAO-15-28 Climate Change

provides disaster assistance through FEMA and other federal agencies.3

In certain states, insurance pools are administered by governmental 

entities or entities established pursuant to state law that provide coverage 

for losses caused by weather-related events. In the private sector, 

primary insurers provide insurance to individuals and businesses directly, 

and reinsurers provide insurance to primary insurers.

As of June 2014, FEMA’s debt to the U.S. Treasury from flood insurance 

payments totaled about $24 billion—primarily to pay claims associated 

with Hurricane Katrina in 2005 and Hurricane Sandy in 2012—and FEMA 

had not repaid any principal on its loan since 2010. NFIP has been on our 

High-Risk List since March 2006 because of concerns about its long-term 

financial solvency and related operational issues.4 While FEMA is 

implementing some changes to NFIP in response to recently enacted 

legislation, it is unclear to what extent these changes will improve the 

program’s financial condition.5 Additionally, in our 2013 High-Risk Update, 

we concluded that FEMA obligated over $80 billion in federal assistance 

for disasters declared during fiscal years 2004 through 2011.6 As of June 

2014, FEMA’s Disaster Relief Fund had spent $3.8 billion for fiscal year 

 3

FEMA’s Disaster Relief Fund (DRF) is the major source of federal disaster recovery 

assistance for state and local governments when a disaster is declared. FEMA obligates 

funds from the DRF to help jurisdictions respond to and recover from declared disasters. 

The DRF is generally funded at a level that is sufficient for what are known as “normal”

disasters, with outlays less than $500 million. When a large disaster occurs, additional 

funding for the DRF may be provided through emergency supplemental appropriations. 

For more information, see Congressional Research Service, Disaster Relief Funding and 

Supplemental Appropriations for Disaster Relief, R40708 (Washington, D.C.: Aug. 5, 

2013) and GAO, Federal Disaster Assistance: Improved Criteria Needed to Assess a 

Jurisdiction’s Capability to Respond and Recover on Its Own, GAO-12-838 (Washington, 

D.C.: Sept. 12, 2012).

4

GAO-13-283. 

5

FEMA will need to implement provisions in both the Biggert-Waters Flood Insurance 

Reform Act of 2012, Pub. L. No. 112-141, tit.ll, subtit. A, 126 Stat. 405 (2012) and the 

Homeowner Flood Insurance Affordability Act of 2014, Pub. L. No. 113-89, 128 Stat. 1020 

(2014), that affect many aspects of NFIP, including its finances, rate setting, mapping, and 

participation, among other things. In addition, over the past 11 years, we have made 

numerous recommendations to FEMA to improve its administration of the program. 

However, as we recently reported, FEMA has not fully addressed all of our prior 

recommendations. See GAO, Overview of GAO’s Past Work on the National Flood 

Insurance Program, GAO-14-279R (Washington, D.C.: Apr. 9, 2014). 

6

GAO, Fiscal Exposures: Improving Cost Recognition in the Federal Budget, GAO-14-28

(Washington, D.C.: Oct. 29, 2013); GAO-13-283; and GAO-12-838.
Page 3 GAO-15-28 Climate Change

2014, with an unspent balance of over $11.3 billion. We have previously 

found that the federal government does not fully budget for these costs—

in part because supplemental appropriations are largely used to fund 

them—obscuring the full cost of disaster relief commitments.7

Further, as we reported in 2014, the federal government’s crop insurance 

costs have increased in recent years, with appropriations more than 

doubling from $3.4 billion in fiscal year 2001 to $7.6 billion in fiscal year 

2012 as program expansion and rising crop prices have led to increasing 

subsidy values and higher claims payments.8 In 2007, we found that 

climate change could increase federal insurers’ financial risk and 

recommended that the Secretaries of Agriculture and Homeland Security 

analyze the potential long-term fiscal implications of climate change for 

crop insurance and flood insurance, respectively, and report their findings 

to Congress.9 USDA and DHS agreed with these recommendations and 

in response issued reports containing such analyses.

You asked us to review the implications of climate change on public flood 

and crop insurance and private sector insurance. This report examines 

(1) how federal and private exposure to losses has changed since our 

2007 report on flood and crop insurance and how climate change may 

affect insured and uninsured losses; (2) how public insurers are preparing 

for climate change and associated challenges, if any; and (3) how 

selected private insurers and reinsurers are preparing for climate change 

and associated challenges, if any.

To determine how exposure to losses has changed since our 2007 report 

on flood and crop insurance and how climate change may affect insured 

and uninsured losses, we reviewed scientific studies and other available 

 7

GAO, Extreme Weather Events: Limiting Federal Fiscal Exposure and Increasing the 

Nation’s Resilience, GAO-14-364T (Washington, D.C.: Feb. 12, 2014); GAO-14-28; and 

Budget Issues: Budgeting for Federal Insurance Programs, GAO/T-AIMD-98-147

(Washington, D.C.: Apr. 23, 1998), According to FEMA officials, FEMA recently increased 

the requested amount of disaster relief funding during the budget cycle, which may reduce 

the federal government’s fiscal exposure.

8

GAO-14-364T; GAO-14-28; GAO, Crop Insurance: Savings Would Result from Program 

Changes and Greater Use of Data Mining, GAO-12-256 (Washington, D.C.: Mar. 13, 

2012). 

9

GAO, Climate Change: Financial Risks to Federal and Private Insurers in Coming 

Decades Are Potentially Significant, GAO-07-285 (Washington, D.C.: Mar. 16, 2007). 
Page 4 GAO-15-28 Climate Change

literature on climate change and analyzed federal and private sector 

exposure data from 2007 through 2013. To understand longer-term 

trends in exposure, we also analyzed federal exposure data from 2000. 

We assessed the reliability of the exposure data and reviewed the 

methodological soundness of each study and determined that the data 

and studies were sufficiently reliable for describing trends in exposure 

and the potential effect of climate change on insured and uninsured 

losses.10 To determine how public insurers are preparing for climate 

change, we reviewed FEMA and RMA documents and interviewed 

agency officials and a nonprobability sample of three state insurers that 

were identified by an industry forecaster as most at-risk of natural 

disasters, whether the state had an insurance pool administered by a 

governmental entity or entity established pursuant to state law, and 

whether the state had experienced an extreme weather event in the past 

decade.11 Further, to determine how private insurers and reinsurers are 

preparing for climate change, we reviewed over 20 industry reports and 

other information from industry representatives we interviewed. We 

interviewed a nonprobability sample of eight insurers and reinsurers, 

representing over 25 percent of the U.S. property and casualty insurance 

market, 15 percent of the private crop insurance market, and over 30 

percent of the U.S. reinsurance market. We selected both large and small 

insurers with relevant experience in flood or crop insurance, to collect a 

variety of perspectives. We also interviewed two catastrophe modeling 

firms, two reinsurance brokerage firms, and eight industry groups 

representing more than 1,000 large and small property and casualty 

insurers. Because we used a nonprobability sample to select 

interviewees, our results are not generalizable to the industry as a whole 

but provide illustrative examples. Appendix I presents a more detailed 

description of our objectives, scope, and methodology.

We conducted this performance audit from November 2013 to October 

2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

 10To assess the reliability of exposure data, we reviewed federal agency procedures for 

collecting and updating the data. For private sector exposure data, we compared 

exposure estimates from two separate firms. To assess the reliability of scientific studies, 

staff from our Chief Scientist’s office and Center for Economics reviewed each study to 

determine whether their methodologies were sound and appropriate for our purposes.

11Because we used a nonprobability sample to select states, our results are not 

generalizable to all 50 states; however, our results can provide illustrative information. 
Page 5 GAO-15-28 Climate Change

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Insurance can spread risk over time, across geographical areas, and 

among industries and individuals. While private insurers assume some 

financial risk when they write policies, they employ various strategies to 

manage risk so that they limit potential financial exposures, earn profits, 

and build capital needed to pay claims. For example, insurers charge 

premiums for coverage and establish underwriting standards, such as 

refusing to insure customers who pose unacceptable levels of risk, or 

limiting coverage in particular geographic areas. Insurance companies 

may also purchase insurance from reinsurers to cover specific portions of 

their financial risk. Reinsurers use similar strategies to limit their risks, 

including charging premiums and establishing underwriting standards.12

States regulate private insurance and may impose various restrictions on 

insurers’ risk management practices, such as premium rate increases and 

coverage limitations, to protect consumers and to ensure insurer 

solvency. However, many of these risk management strategies are not 

available to NFIP, which is required to assume and retain all of the risk 

and to generally accept all insurance applicants, including those with 

potentially high-risk properties.

The uncertain and potentially large losses associated with weatherrelated events are among the biggest risks that property insurers face. 

Virtually anything that is insured—property, crops and livestock, business 

operations, or human life and health—is vulnerable to weather-related 

events. For insurers, remaining financially solvent generally involves 

estimating and setting rates that reflect insured risks; any unanticipated 

changes in the frequency or severity of weather-related events can have 

financial consequences for them. Recent scientific assessments have

found that climate change has or will alter the frequency and/or severity of 

 12According to National Association of Insurance Commissioners (NAIC) data, property 

and casualty insurers wrote around $521.87 billion in premiums in the United States in 

2012, with 11 insurance companies comprising about 50 percent of the property and 

casualty market. Also in 2012, reinsurers wrote about $32.98 billion in reinsurance 

premiums in the United States, a 10.5 percent increase from 2011. 

Background
Page 6 GAO-15-28 Climate Change

damaging weather-related events—such as droughts and floods, alter 

crop productivity, and threaten coastal communities as sea-level rises.13

Under certain circumstances, the private sector may consider some risks 

uninsurable. In other instances, the private sector may offer to insure a 

risk, but at rates that many property owners cannot afford. Without 

insurance, affected property owners must rely on their own resources or 

seek disaster assistance from local, state, and federal sources in the 

event of a loss. In situations where the private sector will not insure a 

particular type of risk, the public sector may create markets to ensure the 

availability of insurance. For example, several states have established 

Fair Access to Insurance Requirements (FAIR) and windstorm plans, that 

pool resources from insurers doing business in the state to make 

insurance available to property owners who either cannot obtain coverage 

in the private insurance market or cannot do so at an affordable rate.

Similarly, at the federal level, the NFIP and the federal crop insurance 

program were established to provide coverage where private markets did 

not exist, and partly to provide an alternative to disaster assistance. NFIP 

has three components: (1) the provision of flood insurance; (2) the 

requirement that participating communities adopt and enforce floodplain 

management regulations that are at least as stringent as FEMA’s national 

minimum standards; and (3) the identification and mapping of floodplains, 

which helps to determine which insurance premiums and regulations 

apply to a particular property. Community participation in NFIP is 

voluntary. However, communities must join NFIP and adopt FEMAapproved building standards and floodplain management strategies in 

order for their residents to purchase flood insurance through the 

program.14 In addition to meeting these federal standards, the regulations 

that each community enacts and implements must meet the minimum 

state requirements, which are established consistent with NFIP 

 13Melillo, Richmond, and Yohe, eds., Climate Change Impacts in the United States: The 

Third National Climate Assessment, and Field, C.B. et al., eds., Summary for 

Policymakers in: Managing the Risks of Extreme Events and Disasters to Advance 

Climate Change Adaptation, A Special Report of Working Groups I and II of the 

Intergovernmental Panel on Climate Change (Cambridge University Press, Cambridge, 

UK, and New York, NY, USA, 2012).

14NFIP regulations identify minimum requirements that communities must fulfill to join and 

stay in the program. The requirements that apply to a particular community depend on its 

flood hazard and the level of detail of the data FEMA provides to the community. 
Page 7 GAO-15-28 Climate Change

standards.

15 For example, communities must adopt at least the minimum 

standards for floodplain management regulations, including building 

requirements to reduce future flood damage, such as requiring new and 

substantially improved or substantially damaged structures in special 

flood hazard areas to be elevated to or above base flood elevation levels. 

Additionally, FEMA provides premium reduction incentives for 

policyholders within communities that take measures to mitigate flood risk 

beyond NFIP minimum requirements through the agency’s program, the 

Community Rating System.16 Under NFIP, the federal government 

assumes the liability for covered losses and sets rates and coverage 

limitations. While NFIP does not subsidize most policies, policyholders 

with certain types of insured properties pay subsidized premiums.

17

For crop insurance, farmers participate voluntarily, but the federal 

government encourages participation by subsidizing their insurance 

premiums. USDA’s RMA administers the federal crop insurance program, 

including issuing new insurance products and expanding existing 

products to new geographic regions. RMA administers the program in 

partnership with private insurance companies that share a percentage of 

the risk of loss or the opportunity for gain associated with each policy.

Federal law prohibits crop insurance from covering losses due to a 

farmer’s failure to follow good farming practices. Good farming practices 

are identified by agricultural experts in a given area and provide

acceptable farming methods for crop insurance policyholders to use in 

producing yields consistent with historical production. Agricultural experts 

 15Any property owner in a participating community may purchase flood insurance. 

However, in participating communities, certain property owners are required to purchase 

flood insurance. Specifically, owners of properties in special flood hazard (SFHA) areas 

who obtain mortgages from federally regulated lending institutions or federal agency 

lenders or who receive direct financial assistance for acquisition or construction of the 

property are required to purchase flood insurance. In addition, individuals in SFHAs who 

receive federal disaster assistance after September 23, 1994, for flood losses to real or 

personal property are also required to purchase and maintain flood insurance on the 

property as a condition for receiving future disaster assistance. FEMA defines SFHAs as 

land in the flood plain subject to a 1 percent or greater chance of flooding in any given 

year—also referred to as the “100-year flood.”

16Depending on the level of activities that communities undertake in four areas—public 

information, mapping and regulatory activities, flood damage reduction, and flood 

preparedness—communities fall into 1 of 10 rate reduction classes. See GAO-14-297R.

17For example, as mentioned previously, recently enacted legislation required FEMA to 

phase out subsidies for some properties, such as nonprimary residences and business 

structures, through 25 percent annual premium increases until the full-risk rate is reached.
Page 8 GAO-15-28 Climate Change

are individuals employed by USDA’s Cooperative Extension System or 

the agricultural departments of universities, or other approved persons, 

whose research or occupation is related to the specific crop or practice for 

which expertise is sought.

The federal government’s disaster relief and flood and crop insurance 

programs create fiscal exposure to weather-related events and climate 

change. For the purposes of this report, fiscal exposures are 

responsibilities, programs, and activities that may either obligate the 

federal government to future spending or create the expectation for future 

spending.18 For example, the government’s response to a weather-related 

event or series of events can strengthen expectations that the 

government will respond in the same way to similar events in the future.

Differences exist in the types of property that public insurers insure, as 

well as their time horizons. For example, federal flood and crop insurance 

programs insure different types of property, with different time horizons. 

While state insurers and NFIP insure permanent structures that are 

designed to last years or decades, federal crop insurance primarily covers 

agricultural commodities that farmers plant and harvest each year. This 

annual cycle can allow farmers to adapt their insured property to changes 

in weather-related risk more easily than state or NFIP policyholders can 

adapt their permanent structures to changing wind or flood risks.

Uncertainty about the magnitude, timing, and extent of the effects of 

climate change in the future presents challenges to both public and 

private insurers. For example, NFIP will likely be affected by future sealevel rise. According to the May 2014 National Climate Assessment, 

although global mean sea level may increase anywhere from 8 inches to 

7 feet in this century, the magnitude of the projected future sea-level rise 

varies considerably along the U.S. coastline due to a variety of factors, 

such as land subsidence and uplift.19 Officials from public insurers and 

some representatives from private industry stated that uncertainty 

regarding climate projections presents challenges to these insurers’ ability 

 18For more information, see GAO, Fiscal Exposures: Improving the Budgetary Focus on 

Long-Term Costs and Uncertainties, GAO-03-213 (Washington, D.C.: Jan. 24, 2003); and 

GAO-14-28.

19Land subsidence is the gradual settling or sudden sinking of the earth’s surface, 

whereas uplift is the rising of the earth’s surface caused by geophysical forces. Both land 

subsidence and uplift can affect sea-level rise. 
Page 9 GAO-15-28 Climate Change

to plan for the future.20 However, as stated in a 2010 National Research 

Council (NRC) report, even though uncertainties exist regarding the exact 

nature and magnitude of impacts, mobilizing now to increase the nation’s 

resilience can be an insurance policy against future climate change 

risks.21

We define resilience as the ability to prepare and plan for, absorb, 

recover from, and more successfully adapt to actual or potential adverse 

events.22 Hazard mitigation—actions that reduce the long-term risks of life 

and property by lessening the impact of disasters—and climate change 

adaptation—the adjustments to natural or human systems in response to 

actual or expected climate change—promote resilience to extreme 

weather events, among other things.

Recent executive orders have addressed the topics of vulnerabilities to 

extreme weather events and climate change-related risks. Executive 

Order 13632, which was signed in December 2012, established the 

Hurricane Sandy Rebuilding Task Force to, among other things, assess 

current vulnerabilities to extreme weather. The task force was also to 

identify opportunities for achieving rebuilding success and improving the 

affected region’s resilience, consistent with the National Disaster 

Recovery Framework’s commitment to support economic vitality, enhance 

public health and safety, protect and enhance natural and man-made 

infrastructure, and ensure appropriate accountability. Executive Order 

13653, which was signed in November 2013, directs federal agencies to, 

consistent with their missions, (1) address barriers to the nation’s 

resilience to climate change; (2) reform policies that may, perhaps 

unintentionally, increase the vulnerability of natural or built systems, 

economic sectors, natural resources, or communities to climate change; 

 20According to NOAA officials, for shorter time frames, natural climate variability can limit 

predictability.

21NRC, America’s Climate Choices: Panel on Adapting to the Impacts of Climate Change, 

Adapting to the Impacts of Climate Change (Washington, D.C.: 2010). NRC is the 

principal operating agency of the National Academy of Sciences and the National 

Academy of Engineering.

22GAO, Disaster Resilience: Actions Are Underway, but Federal Fiscal Exposure 

Highlights the Need for Continued Attention to Longstanding Challenges, GAO-14-603T

(Washington, D.C.: May 14, 2014).
Page 10 GAO-15-28 Climate Change

and (3) identify opportunities to support and encourage smarter, more 

climate-resilient investments.

23

Growing federal and private sector exposure since our 2007 report on 

flood and crop insurance has increased insured and uninsured losses to 

date, and climate change and related increases in the frequency and 

severity of extreme weather events may further increase such losses in 

coming decades.

Federal and private sector exposure to potential insured losses grew 

since 2007. Specifically, inflation-adjusted federal exposure to potential 

insured losses grew from $1.3 trillion to $1.4 trillion (8 percent) from 2007 

through 2013. According to our analysis of the most recent data available, 

private sector exposure grew from an estimated $60.7 trillion to $66.5 

trillion (10 percent) from 2007 through 2012, in 2014 dollars.24 Property 

insured under the NFIP comprised 91 percent of federal exposure to 

insured loss in 2013, but it grew the least (4 percent) from 2007 to 2013. 

Property insured under the federal crop insurance program accounted for 

9 percent of total federal exposure to insured loss in 2013, but it grew the 

most (68 percent) since 2007, as shown in table 1.

 23Executive Order 13653: Preparing the United States for the Impacts of Climate Change, 

November 6, 2013.

24Private sector exposure is based on estimates from two insurance industry modeling 

firms, AIR Worldwide and Risk Management Solutions (RMS). Growth is shown through 

2012 rather than 2013 because RMS and AIR Worldwide did not calculate estimates for 

2013.

Growth in Federal 

and Private Sector 

Exposure Has 

Increased Losses to 

Date, and Climate 

Change May Increase 

Losses in Coming 

Decades

Federal and Private Sector 

Exposure Have Grown 

and Increased Losses to 

Date
Page 11 GAO-15-28 Climate Change

Table 1: Federal Exposure to Potential Loss from Insured Property, 2007 to 2013, in 2014 Dollars

Dollars in billions

Program

Total value of property insured 

Percentage of federal 

exposure

Percentage 

increase

2007 2013 2013 2007-2013

Federal 

National flood insurance $1,267 $1,321 91% 4%

Federal crop insurance $75 $125 9% 68%

Total $1,342 $1,446 100% 8%

Sources: GAO analysis of Federal Emergency Management Agency and Risk Management Agency data on total exposure. | GAO-15-28

For historical context, in comparing the 7-year period shown in the table

to the preceding 7-year period (2000 to 2006), NFIP’s exposure to loss 

grew more slowly from 2007 to 2013, and the federal crop insurance 

program’s exposure grew more quickly.25 From 2000 to 2006, inflationadjusted NFIP exposure grew from $749.2 billion to $1.20 trillion (60 

percent), compared with 4 percent from 2007 to 2013. In contrast, from 

2000 to 2006, the federal crop insurance program’s exposure grew from 

$45.5 billion to $56.9 billion (25 percent) compared with 68 percent from 

2007 to 2013, adjusted for inflation. Also, as a share of total federal 

exposure, in 2006, federal crop insurance comprised 5 percent of total 

federal exposure, compared to 9 percent in 2013.

Disaster relief appropriations—which could be considered a proxy for 

federal exposure to uninsured losses—also grew.26 Based on a 2013 

analysis of disaster relief appropriations by the Congressional Research 

Service, the amount of inflation-adjusted disaster relief per fiscal year 

increased from a median of $6.2 billion for the years 2000 to 2006, to a 

median of $9.1 billion for the fiscal years 2007 to 2013 (46 percent).27

 25For the purposes of this report, we included data on exposure during the time frame 

covered by our prior work for context. 

26We compared the median value of disaster appropriations over a multiyear time period 

to control for large fluctuations in annual disaster relief appropriations from year to year.

27Congressional Research Service, Disaster Relief Funding and Supplemental 

Appropriations for Disaster Relief, R40708 (Washington, D.C.: Aug. 5, 2013) and 

Congressional Research Service, FEMA’s Disaster Relief Fund: Overview and Selected 

Issues, R43537 (Washington, D.C.: May 7, 2014). Not all disasters are weather-related, 

such as earthquakes.
Page 12 GAO-15-28 Climate Change

Although federal exposure spans all 50 states, it is concentrated in certain 

parts of the country, such as the Mississippi River Basin, California’s 

central valley, and coastal areas, as shown in figure 1.

Figure 1: Disaster Declarations 2000-2013, Federal Flood Insurance and Federal Crop Insurance 2013 Exposure by County

Notes: We included disaster declarations from 2000 to 2013 to better represent geographic exposure, 

given the annual variability of weather-related events. 137 out of 15,457 declarations (0.9 percent) 

during this period were not weather-related and include events such as earthquakes and tsunamirelated flooding. The flood insurance program, administered by the Federal Emergency Management 

Agency, within the U.S. Department of Homeland Security, makes flood insurance available to 

residential property owners and businesses. According to USDA’s website, the federal crop insurance 

program promotes the economic stability of agriculture through a sound system of crop insurance and 
Page 13 GAO-15-28 Climate Change

providing the means for the research and experience helpful in devising and establishing such 

insurance. Management is vested in a Board of Directors, subject to the general supervision of the 

Secretary of Agriculture.

Federal and private insured exposure to loss grew for a variety of 

reasons, including increases in the value of property insured and 

increases in the amount of coverage written. For example, according to 

data that the National Oceanic and Atmospheric Administration (NOAA)

obtained from the U.S. Census Bureau, the U.S. coastal population grew 

by 39 percent from 1970 to 2010, and population density in coastal areas 

is six times greater than inland areas. Furthermore, a study by an 

insurance industry modeling firm found that the total value of property in 

U.S. East Coast and Gulf Coast areas grew by just under 4 percent each 

year since 2007 to over $10 trillion in 2012, in nominal dollars. Some 

studies and our prior work, suggest that the current level of federal fiscal 

exposure to losses may become increasingly difficult to sustain in coming 

decades, given these socioeconomic factors and other budget 

constraints.28

The 20 scientific and industry studies we reviewed that examined the 

historical loss record generally found that the exposure growth in hazardprone areas has largely driven increased insured and uninsured losses to 

date. Specifically, most loss analyses we reviewed that found an upward 

trend, identified socioeconomic factors, such as growth in population and 

the value of property, as the primary drivers of increasing losses to date. 

Most studies we reviewed did not find a statistically significant increase in 

such losses conclusively attributable to climate change.29 One 

assessment of loss studies noted that climate change cannot be ruled out 

as a factor because of limitations in data quality, different methods of 

correcting for socioeconomic trends, and changes in insurance 

 28J. David Cummins, Michael Suher, and George Zanjani, “Federal Financial Exposure to 

Natural Catastrophe Risk,” chapter in Measuring and Managing Federal Financial Risk, 

National Bureau of Economic Research, ed. Deborah Lucas (Chicago: University of 

Chicago Press, 2010) 61-92 and GAO-14-28.

29Some of the studies we reviewed did find a statistically significant trend in losses for 

certain weather events, however, studies also cited a variety of potential reasons other 

than climate change for the identified trends, such as natural variability. 
Page 14 GAO-15-28 Climate Change

coverage.30 Although most of the studies we reviewed did not find a clear 

climate change signal in historical losses, they noted that climate change 

may start to affect losses in the near future.

Recent assessments of loss projections for certain weather events 

suggest that climate change may increase losses substantially by 2040, 

and potentially double annual losses by 2100, compounding existing loss 

trends. For example, our analysis of 20 scientific studies shows a wide 

range of projections that, on average, predict a 14 to 47 percent increase 

in inflation-adjusted U.S. hurricane-related losses—which significantly 

contribute to total U.S. losses—attributable to changes in the severity of 

storms by 2040, and a 54 to 110 percent increase in losses by 2100, as 

shown in table 2.

Table 2: Estimated Percentage Change in Inflation-Adjusted U.S. Hurricane Insured and Uninsured Losses Potentially 

Attributable to Climate Change Based on Peer-Reviewed Studies Conducted Since 2007

Study author, date

Percentage change from 2000 to 2040 Percentage change by end of century (year)

Range in losses 

Central estimate in 

losses Range in losses 

Central estimate in 

losses

Hallegatte, 2007 NA 22%a NA 54% (2100)

Bender et al., 2010 -27 to 36% 14%a,b -54 to 71% NAb,c

Nordhaus, 2010 

(2090)

12 to 92% 47%a 30 to 220% 110% (2100)

Mendelsohn et al., 2012d NA NA 54 to 240% 93% (2100)

Sources: Adapted from Bouwer, L.M., Projections of Future Extreme Weather Losses Under Changes in Climate and Exposure, Risk Analysis, vol. 33 (2013) 915-930; McAneney, J., et al., Market-Based 

Mechanisms for Climate Change Adaptation: Assessing the Potential for and Limits to Insurance and Market-Based Mechanisms for Encouraging Climate Change Adaptation, National Climate Change 

Adaptation Research Facility (Gold Coast, Australia: 2013); Hallegatte, S., The Use of Synthetic Hurricane Tracks in Risk Analysis and Climate Change Damage Assessment. Journal of Applied 

Meteorology and Climatology, vol. 46, (2007) 1956-1966; and Mendelsohn et. al.,”The impact of climate change on global tropical cyclone damage.” Nature Climate Change, vol. 2, (2012) 205-209. |

GAO-15-28

Notes: These estimates are based on different assumptions and methods, including different models 

of climate change’s potential effects. Uncertainty remains about the potential feedback effects in 

various earth systems that may affect the magnitude of changes in hurricane severity. The end of 

century estimates extrapolated expected damages based on different time periods: Hallegate and

Bender et al. (1900-2005), Nordhaus (1900-2008), and Mendelsohn et al. (1960-2009).

a

These estimates were scaled to a linear trend from estimates covering different time periods in 

Bouwer, 2013. We excluded two studies included in Bouwer, 2013, because they were not peerreviewed.

b

 30Summary for Policymakers in: Managing the Risks of Extreme Events and Disasters to 

Advance Climate Change Adaptation, A Special Report of Working Groups I and II of the 

Intergovernmental Panel on Climate Change (Cambridge University Press, Cambridge, 

UK, and New York, NY, USA, 2012).

This estimate measures damage potential rather than expected damage, which requires 

differentiating between hurricanes that strike the coast and those that remain offshore.

Climate Change and 

Related Extreme Weather 

May Increase Insured and 

Uninsured Losses in 

Coming Decades
Page 15 GAO-15-28 Climate Change

c

Although an average value of 28 percent is reported in McAneney et al., we could not verify the 

average because we did not have sufficient information from the source to independently verify the 

average.

d

Results are for North America, not the U.S. alone.

With exposure projected to increase over the same period, annual 

insured and uninsured losses could be much higher by 2100 based on 

some of the studies we reviewed.31 Specifically, one peer-reviewed study 

projected property exposure in hazard-prone areas to more than double

losses by 2100.32 When combined with the range of climate change 

projections, total losses could increase anywhere from about 50 to 340

percent by 2100.

For agriculture, climate disruptions to production have increased in the 

past 40 years, and the May 2014 National Climate Assessment projects 

such disruptions will increase over the next 25 years. According to this 

report, producers have many available strategies for adapting to the 

average temperature and precipitation changes projected for the next 25 

years, including technological advancements, expansion of irrigated 

acreage, and regional shifts in crop production, among others. However, 

according to the report, by midcentury, when temperatures could increase 

by between 1.8°F and 5.4°F and precipitation extremes could further 

intensify, expected yields of major U.S. crops and farm profits could 

decline, even with the current pace of technological advances and 

geographic shifts.33

 31McAneney, J., et al., Market-Based Mechanisms for Climate Change Adaptation: 

Assessing the Potential for and Limits to Insurance and Market-Based Mechanisms for 

Encouraging Climate Change Adaptation, National Climate Change Adaptation Research 

Facility (Gold Coast, Australia: 2013) and Mendelsohn et al., The Impact of Climate 

Change on Global Tropical Storm Damages, The World Bank Policy Research Working 

Paper (Washington, D.C.: 2011).

32Mendelsohn et al.,”The Impact of Climate Change on Global Tropical Cyclone Damage.” 

Nature Climate Change, vol. 2 (2012) 205-209.

33Melillo, Richmond, and Yohe, eds., Climate Change Impacts in the United States: The 

Third National Climate Assessment.
Page 16 GAO-15-28 Climate Change

Public insurers have commissioned climate change studies, incorporated 

climate change adaptation into their planning, and taken other steps to 

better understand and prepare for climate change’s potential effects. 

However, inherent challenges of federal insurance programs, such as 

how federal insurers can address policyholders’ long-term risk given the 

short-term focus of insurance contracts, may impede NFIP and RMA’s 

ability to minimize long-term federal exposure to climate change.

Public insurers have begun taking steps to understand climate change 

risks, such as sea-level rise, and have identified actions that could 

manage their exposure to climate change’s effects. For example, federal 

insurers commissioned climate change studies and modeling to better 

understand the long-term implications of climate change for their 

programs. Regarding flood insurance, a FEMA-commissioned June 2013 

study found that sea-level rise, erosion, and other changes in coming 

decades will affect the NFIP by expanding areas prone to flooding and 

requiring premium increases to cover higher losses.34 The report also 

found that small annual rate increases could allow NFIP to adjust to 

gradual climate change effects. Based on this report’s findings, FEMA 

initiated two pilot studies to analyze sea-level rise and its impacts in 

special flood hazard areas. FEMA appointed members to a Technical 

Mapping Advisory Council to, among other things, develop 

recommendations to ensure FEMA uses the best available methodology 

to consider future development on flood risk as required by the BiggertWaters Flood Insurance Reform Act of 2012 (Biggert-Waters Act).35

According to FEMA officials, the council expects to release its flood 

mapping report in September 2015.

Regarding crop insurance, RMA’s 2009 study found that the crop 

insurance program has self-correcting features, which allow RMA to 

 34AECOM, The Impact of Climate Change and Population Growth on the National Flood 

Insurance Program Through 2100, a report prepared for the Federal Insurance and 

Mitigation Administration, Federal Emergency Management Agency (June 2013).

35Pub. L. No. 112-141, div. F, tit. II, subtit. A, §100215 126 Stat. 405, 924-27 (2012).

Public Insurers Have 

Begun Taking Steps 

to Prepare for Climate 

Change Effects, but 

Challenges May Limit 

Their Ability to 

Manage Future 

Exposure

Public Insurers Have 

Begun Taking Steps to 

Understand Climate 

Change Risk and Prepare 

for Related Effects
Page 17 GAO-15-28 Climate Change

manage its exposure to gradual changes in climate.36 For example, 

farmers’ annual production history determines their coverage and, if 

yields decrease under climate change, the program’s exposure adjusts 

downward as well. RMA may also adjust the availability of coverage for 

crops to respond to geographic shifts in production as conditions become 

more or less favorable for certain crops. According to RMA officials, 

farmers’ desire to maximize their profits and maintain their businesses will 

motivate them to alter their production practices as climate change effects 

occur. However, the agency’s 2009 study also recommended that RMA 

should better monitor weather and climate to understand potential rapid 

changes in future conditions and how to adapt agricultural and risk 

management practices to address climate change. RMA entered into a 

cooperative agreement with Oregon State University’s Parameterelevation Regressions on Independent Slopes Model (PRISM), Climate 

and Weather Group that will enhance RMA’s monitoring of weather and 

climate.37 Representatives from PRISM and RMA said the two 

organizations have engaged in a long-term program to develop a 100-

year historical weather time series that could help analyze climate 

change’s effect on agriculture.

Furthermore, in response to recent executive orders, FEMA and RMA 

have developed climate change adaptation plans, which outline planned 

agency actions to manage significant climate change related risks to, and 

vulnerabilities in, agency operations and missions.38 For example, 

according to its climate change adaptation policy statement, FEMA will 

continue its study of climate change impacts on NFIP. Furthermore, 

according to program officials, climate change efforts will incorporate the 

best climate science available into flood maps—which form the basis for 

identifying property owners’ flood risk and providing guidance to 

communities on land-use decisions. According to its adaptation plan, 

 36RTI International, Climate Change Impacts on Crop Insurance, a report prepared at the 

request of Risk Management Agency, U.S. Department of Agriculture (December 2009).

37The PRISM Climate Group gathers climate observations from a wide range of 

monitoring networks, puts its data and analysis through peer reviews, and develops 

spatial climate datasets to reveal short- and long-term climate patterns. The resulting 

datasets incorporate a variety of modeling techniques and are available at multiple 

spatial/temporal resolutions, covering the period from 1895 to the present. 

38Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic 

Performance and Executive Order 13653, Preparing the United States for the Impacts of 

Climate Change.
Page 18 GAO-15-28 Climate Change

RMA will update program parameters, such as the earliest and final 

planting dates. Changing planting dates, as needed, can help farmers 

avoid exposing crops to new changes in weather or climate. RMA officials 

told us that they also recently worked with USDA’s Natural Resources 

Conservation Service to ensure consistency between crop insurance and 

conservation programs that protect soil and water resources.

RMA also participates in the broader USDA climate change effort, such 

as USDA’s Global Change Task Force, according to RMA and USDA 

officials. This task force coordinates USDA activities related to climate 

change and provides a venue for sharing information within the agency, 

according to an agency document. In addition, USDA’s Agricultural 

Research Service (ARS), has identified several climate change 

adaptation strategies to promote long-term resilience to climate change 

effects such as increased soil erosion and water scarcity. Specifically, a 

2013 ARS report found that resilient agricultural practices such as 

conservation tillage—where farmers leave some crop residue on fields—

and water conservation will help minimize climate change costs and 

sustain agricultural production in a changing climate. According to USDA 

officials, the agency also plans to develop region-specific adaptation 

strategies through its newly established Regional Climate Hubs, which 

are to deliver science-based, practical information to farmers and to 

support decision making related to mitigation of, and adaptation to,

climate change.

Additionally, for a variety of reasons, federal insurers have adjusted their 

rate-setting calculations in ways that may better position them to respond 

to climate change. Although not specific to climate change, the BiggertWaters Act requires NFIP to establish a reserve to help meet expected 

future obligations and to establish standards that ensure that its flood 

maps’ flood risk determinations are adequate, both of which should help 

the agency collect funds that more closely match the risks it incurs or that 

are more likely to be sufficient to cover losses. FEMA officials said the 

agency has also increased the reserve amount in premiums to cover 

flood risk uncertainty, to better reflect the current flood risk associated 

with properties below base flood elevation. Recently enacted legislation 

required FEMA to phase out subsidies for some properties such as 

nonprimary residences and business structures through 25 percent 

annual premium increases until the full-risk rate is reached.

In response to a 2011 rate study, RMA changed its rate calculations to 

more heavily weigh recent weather data, which RMA documents suggest 

could enable premiums to more quickly and fully reflect changes in the 
Page 19 GAO-15-28 Climate Change

climate.39 By law, RMA must set crop insurance premiums at rates 

sufficient to cover projected claims. Due in part to weather variability, in 

some years, RMA will likely collect more premiums than it pays in claims, 

and vice versa. RMA currently uses an average of the previous 20 years 

of yields to calculate its rates, rather than the previous method of 

assigning equal weight to all years back to the fixed base year of 1975—

which was in place prior to 2012.40

Moreover, FEMA, in conjunction with other federal agencies, has taken 

some recent steps to manage future risks related to climate change for 

disaster relief. For example, the Hurricane Sandy Rebuilding Task Force 

implemented a minimum flood risk reduction standard for Sandy-related 

disaster funding to account for future sea-level rise in response to 

Executive Order 13632.41 Under this standard, structures repaired or 

rebuilt must meet forward-looking standards, such as elevating the 

ground floor of a building 1 foot higher than existing FEMA standards. In 

addition, according to FEMA officials, a current interagency effort seeks to 

develop a Federal Flood Risk Reduction Standard that would apply to 

future disaster relief appropriations—although it is too early to know 

whether such a standard will incorporate future risk. Furthermore, 

according to a July 2014 White House statement, FEMA will issue new 

guidance that requires states to incorporate climate change into their 

hazard mitigation plans as a condition for receiving disaster relief.42

FEMA’s Hazard Mitigation Assistance programs and post-disaster grants 

 39Section 508(i)(2) of the Federal Crop Insurance Act as amended requires RMA to 

periodically review the methodologies for rating plans.

40RMA can still use historical data more than 20 years old for estimating potential 

catastrophic events. However, in the total rate calculation, the old data will receive less 

weight than in pre-2011 calculations.

41This task force was established by Executive Order 13632: Establishing the Hurricane 

Sandy Rebuilding Task Force, December 7, 2012. 

42According to a July 2014 White House statement, FEMA will release new guidance for 

state hazard mitigation plans that calls upon states to consider climate variability as part of 

their requirement to address the probability of future events in state planning efforts, in an 

effort to rebuild stronger and safer after natural disasters and ensure that states prepare 

for the impacts of climate change. The White House, Office of the Press Secretary, July 

16, 2014, Fact Sheet: Taking Action to Support State, Local, and Tribal Leaders as They 

Prepare Communities for the Impacts of Climate Change, accessed August 1, 2014, 

http://www.whitehouse.gov/the-press-office/2014/07/16/fact-sheet-taking-action-supportstate-local-and-tribal-leaders-they-pre. 
Page 20 GAO-15-28 Climate Change

currently do not require grantees to incorporate sea-level rise into their

cost-benefit calculations for proposed projects, although they do allow it.43

Regarding other public insurance programs, at the state level, some state 

insurers in hazard-prone areas have transferred risk to the private sector 

to reduce their exposure to claims. Specifically, officials at two of the state 

insurers we interviewed told us they have sold policies (“depopulation”), 

bought reinsurance to transfer a portion of the risk in their portfolio to 

another insurer, and sold bonds that provide funding to the insurer should 

a catastrophic weather event occur (“catastrophe bonds”). These risk 

transfer methods reduce exposure to losses from extreme weather. 

Reinsurance and catastrophe bonds are short-term, market-based risk 

transfer methods, typically of 1 to 3 years in duration.44 We previously 

concluded that there are several strategies—many which would require 

statutory authority to implement but a few that FEMA currently has 

authority to implement—to be considered at the federal level to allow the 

transfer of risk to the private sector.45 The Biggert-Waters Act also 

required FEMA to issue a report in 2013 that assessed the capacity of the 

private reinsurance, capital, and financial markets to assume a portion of 

the insurance risk of NFIP.

Federal insurers face two main program challenges that may constrain 

their ability to manage their fiscal exposure and address future climate 

change risk. First, federal law encourages federal insurers, such as 

FEMA and RMA, to provide affordable insurance to policyholders through 

subsidized rates, which lessens the agencies’ ability to collect sufficient 

 43FEMA’s Hazard Mitigation Assistance programs include the Hazard Mitigation Grant 

Program, which assists in implementing long-term hazard mitigation measures following a 

major disaster; the Pre-Disaster Mitigation Program, which provides funds for hazard 

mitigation planning and projects on an annual basis, and Flood Mitigation Assistance 

Program, which provides funds for projects to reduce risk of flood damage to buildings that 

are insured under NFIP on an annual basis. 

44For reinsurance and catastrophe bonds, the market sets the cost. The transaction 

occurs at a price acceptable to both the buyer(s) and seller(s) of the risk.

45GAO, Flood Insurance: Strategies for Increasing Private Sector Involvement, 

GAO-14-127 (Washington, D.C.: Jan. 22, 2014). NFIP’s operating environment differs 

from that of traditional insurers and limits FEMA’s ability to keep the program financially 

sound. In particular, NFIP assumes and retains all of the risks for the policies it sells, is 

required to accept virtually all applicants for insurance, and cannot deny coverage for 

potentially high-risk properties.

Federal Insurers Face 

Challenges Managing 

Future Exposure to 

Climate Change
Page 21 GAO-15-28 Climate Change

premiums from policyholders to pay claims, increases the federal 

government’s fiscal exposure, and may reduce policyholders’ incentives 

to manage risk by giving them inaccurate signals about the level of risk.46

Specifically, federal insurers face a challenge between providing 

affordable premiums through subsidies and managing financially selfsufficient programs by charging policyholders full-risk premiums. 

Additionally, while insurers, in general, communicate the risk of incurring 

losses to policyholders through their premium rates, by subsidizing some 

policies, federal insurers have not provided all policyholders with accurate 

price signals about their risk of incurring losses.47 As a result, some NFIP 

and federal crop insurance policyholders may perceive their risk of loss to 

be lower than it really is and may have less financial incentive to reduce 

this risk.48

For example, FEMA offers subsidized premium rates for policies covering 

certain structures, some of which are in high-risk areas. As a result of 

NFIP’s historical rate structure, the program has generated sufficient 

premiums to cover claims in years with average losses but has not had 

sufficient funds to cover claims in catastrophic loss years, and FEMA has 

an outstanding balance with the U.S. Treasury of $24 billion to pay for 

claims in these years. Although FEMA is phasing out most subsidies, they 

may remain in place for many years, and while they are in place, newly 

 46Although the Homeowners Flood Insurance Affordability Act requires FEMA to phase 

out premium subsidies, this process may take several years. Consequently, subsidized 

rates remain a program challenge.

47We previously found that subsidized policies in 2012 accounted for about 20 percent of 

NFIP policies, and premium subsidies accounted for about 62 percent of crop insurance 

premiums collected by RMA in 2011. See GAO, Flood Insurance: More Information 

Needed on Subsidized Properties, GAO-13-607 (Washington, D.C.: July 3, 2014) and 

GAO-12-256.

48According to RMA, under the crop insurance program, insurance providers notify every 

producer about how much premium was paid by the government and how much is paid by 

the producer. Under the Homeowner Flood Insurance Affordability Act of 2014, FEMA is 

required to communicate full-risk flood determinations to individual property owners 

regardless of whether their rates are full-risk or subsidized. However, in a July 2013 

report, we found that property elevations—which inform flood risk determinations—are 

unknown for 97 percent of both 1.15 million historically subsidized policies and more than 

700,000 subsidized policies in special flood hazard areas. In the report, we concluded that 

FEMA will need elevation certificates to phase out and eventually eliminate subsidies and 

revise rates over time. GAO-13-607. We recommended that FEMA develop and 

implement a plan, including a timeline, to obtain needed elevation information as soon as

practicable.
Page 22 GAO-15-28 Climate Change

purchased residential properties may qualify for subsidized NFIP rates.49

As long as some NFIP policyholders only pay for a portion of their risk of 

losses due to subsidized premiums, they receive inaccurate price signals 

about their property’s full flood risk—regardless of what other information 

FEMA may provide. Consequently, policyholders who receive subsidized 

rates may have limited financial incentive to take steps, such as 

floodproofing their homes above base flood elevation, to reduce their 

risk.50

For federal crop insurance, although RMA is required to collect sufficient 

premiums to cover projected claims, the premiums are subsidized by the 

federal government. For example, we previously found that the 

government paid about 62 percent of premium costs for the program in 

2011. The government continued to pay 62 percent of premium costs in 

2013, which totaled about $7.3 billion.51 Also, in August 2014, we found 

that the costs of federal crop insurance have grown, primarily due to an 

increase in the value of premium subsidies.52 According to an April 2014 

Congressional Budget Office report, crop insurance program costs are 

expected to average $8.9 billion annually, for fiscal years 2014 through 

2023. Similar to flood insurance, federal crop insurance policyholders 

receive inaccurate price signals about their potential risk of loss when 

they receive such premium subsidies. Although farmers are informed of 

the subsidy amount and have an incentive to maximize their annual 

yields, they do not bear the true cost of their risk of loss due to weatherrelated events, such as drought—which could affect their farming 

decisions.53

 49Pub. L. No. 112-141, div. F, tit.ll, subtit. A (2012), Homeowner Flood Insurance 

Affordability Act of 2014, Pub. L. No. 113-89 (2014). 

50According to FEMA guidance, floodproofing is any combination of structural and 

nonstructural additions, changes, or adjustments to structures which reduce or eliminate 

flood damage to real estate or improved real property, water and sanitary facilities, 

structures and their contents. For example, a property owner could make their structure 

watertight below base flood elevation.

51See also GAO-12-256 for more information on historical premium subsidy rates. 

52GAO, Crop Insurance: Considerations in Reducing Federal Premium Subsidies, 

GAO-14-700 (Washington, D.C.: Aug. 8, 2014). 

53For example, if a farmer has to make a decision about whether to farm land that may 

pose a higher risk of loss, the farmer is less likely to do so if he or she would have to pay a 

full rather than a subsidized insurance premium. 
Page 23 GAO-15-28 Climate Change

In prior work, we concluded that reducing subsidies and charging full-risk 

premiums to individual policyholders would decrease the federal 

government’s fiscal exposure under the flood and crop insurance 

programs.54 Reducing the federal government’s fiscal exposure to losses 

under federal insurance programs and sending more accurate signals to 

policyholders about their risk, become even more important as the risks 

from climate change and related extreme weather events increase.

Second, given the short-term nature of insurance, public insurers face a 

challenge in encouraging their policyholders to reduce their long-term 

exposure to climate change risks.55 Property insurance contracts typically 

estimate and communicate risk of property losses for the 1-year term of a 

policy. However, climate change effects on insured property, such as 

buildings or fields in production, may span decades. Because FEMA and 

RMA only provide policyholders with price signals for expected losses in 

the upcoming year, these policyholders may not be encouraged to reduce 

long-term risks for their property. Similarly, in agriculture, the tension 

between the short- and long-term extends beyond insurance into farming 

operations. According to RMA officials, farmers make annual decisions on 

the starting times and types of crops they plant and buy seed for the 

following year. They focus more heavily on this short-term time horizon, in 

part because seed and farming technology constantly change.

Furthermore, building to community standards that are identical to 

existing NFIP standards—which are based on near-term flood risk—may 

unintentionally increase policyholders’ long-term vulnerability to climate 

change as sea-level rises or erosion increases properties’ flood risk—

which does not reflect the direction contained in Executive Order 13653.

 54GAO-14-700, GAO-13-607, and GAO-12-256. We have also found that the federal 

government’s cash-based budgeting does not adequately reflect the government’s cost or 

the economic impact of federal insurance programs. Cash-based budgeting generally 

recognizes costs as they are paid, whereas accrual-based budgets recognize costs when 

commitments are made. We concluded the potential benefits of an accrual-based 

budgeting approach for federal insurance programs warrant continued effort in the 

development of risk-assumed cost estimates. See GAO/T-AIMD-98-147. As we previously 

found, the full cost of crop insurance subsidies and administrative costs is reflected in the 

budget. GAO-14-28.

55If insurance contracts were long-term, other, different challenges could result. For 

example, long-term contracts could be more difficult to price and could be prohibitively 

expensive because of the need for greater risk margins reflecting the greater uncertainty 

of the magnitude of long-term changes.
Page 24 GAO-15-28 Climate Change

This is because, in the short-term, policyholders may be less likely to 

consider taking actions to protect their homes or localities against future 

risk and may continue to build in high-risk areas. According to FEMA 

guidance, the NFIP standards are periodically revised to incorporate new 

regulations or clarify old ones. Communities in turn must then update their 

own regulations to maintain consistency with the NFIP standards. Without 

incorporating forward-looking minimum standards into NFIP’s 

requirements, similar to the minimum standard applied by the Hurricane 

Sandy Rebuilding Task Force, NFIP policyholders and localities may 

continue to build and rebuild structures to current community standards 

that may not reflect the changing weather-related risks faced over 

structures’ designed life spans—thereby exacerbating the federal 

financial risk to climate change.

Regarding the federal crop insurance program, federal law prohibits crop 

insurance from covering losses due to farmers’ failure to follow good 

farming practices. RMA’s good farming practices provide acceptable 

farming methods for crop insurance policyholders to use in producing 

yields consistent with historical production. However, these practices are 

focused on maintaining historic crop yields over the term of the annual 

insurance contract, and some of these practices may unintentionally 

increase the vulnerability of agriculture to climate change, contrary to 

Executive Order 13653’s directive for agencies to manage vulnerabilities 

to climate change. For example, certain practices, such as conventional 

tillage and traditional irrigation methods, may maintain historic crop yields 

in the short-term, but they may inadvertently reduce agriculture’s longterm resilience through increased erosion, depleted soil quality, and 

inefficient water use. RMA officials said that crop insurance adjusts to 

farmers’ best management practices and should follow their adjustments 

rather than dictate their behavior. However, a variety of factors influence 

farmers’ production practices and, in some cases, farmers may not adopt 

resilient practices unless these practices also maximize farmers’ shortterm net benefits, consistent with crop insurance’s focus on maintaining 

historic production.56 By not encouraging agricultural experts to 

recommend or incorporate resilient agricultural practices into their expert 

guidance for growers’ good farming practices, RMA is likely missing an 

opportunity to decrease existing and future fiscal exposures to climate 

 56For example, RMA officials said that appropriate farming practices vary depending on 

the farm location and the conditions specific to any given year.
Page 25 GAO-15-28 Climate Change

change. Consequently, crop insurance may continue to cover losses 

resulting from practices that increase vulnerability to climate change.

Many private property and casualty insurers and reinsurers have taken 

some steps since our 2007 report on flood and crop insurance to 

understand and report on their risks associated with climate change, 

including participating in industry climate change surveys, and issuing 

reports that identify and assess climate change risks and trends in 

weather-related losses. While selected insurers we interviewed said they 

manage climate change risks through their underwriting practices, we 

found that the industry faces challenges in preparing for long-term climate 

change, such as short-term insurance contracts and catastrophe 

modeling limitations.

Since our 2007 report on flood and crop insurance, industry 

representatives, including insurers, reinsurers, and brokerage firms, have 

reported on climate change risks they face. For example, many insurers 

have reported on how they incorporate climate change into their risk 

management practices through an annual industry survey adopted by the 

National Association of Insurance Commissioners (NAIC) in 2010.57

According to an analysis by the California Department of Insurance, 

which administers the survey, 1,067 insurers participated in the climate 

risk disclosure survey in 2013, for reporting year 2012.58 The California 

Department of Insurance found that 74 percent of insurers that 

participated in the 2012 survey indicated that they have a process for 

identifying and assessing climate change-related risks, and 65 percent of 

insurers indicated that they have encouraged policyholders to reduce the 

 57According to NAIC, the climate risk disclosure survey was designed to inform state 

regulators about how insurers incorporate climate change into their risk management 

practices and provide benchmarks that insurers could use to assess their climate change 

strategies and identify how climate change affects their business. The survey consisted of 

eight questions, asking insurers to describe how they incorporate climate risks into their 

mitigation, risk management, and investment plans, and to identify steps taken to engage 

key constituencies and policyholders on the topic of climate change. 

58The California Department of Insurance presented its analysis of the 2012 survey results 

in March 2014 to NAIC’s climate change working group. We did not assess the reliability 

of the California Department of Insurance’s findings.

Many Private Insurers 

and Reinsurers Have 

Identified and 

Assessed Climate 

Change Risks, but 

Preparing for LongTerm Effects Is 

Challenging

Many Private Insurers and 

Reinsurers Identified and 

Assessed the Climate 

Change Risks They May 

Face
Page 26 GAO-15-28 Climate Change

losses caused by climate change-influenced events. According to several 

insurers and industry representatives we interviewed, insurers generally 

manage their exposure to weather-related losses associated with climate 

change through their underwriting practices, which include charging riskbased premiums, managing coverage options, and sharing exposure to 

losses by purchasing reinsurance.

In addition to insurers’ participation in the climate risk disclosure survey, 

other insurance industry representatives have identified and assessed 

risks associated with climate change. For example, representatives from 

three of four reinsurers we interviewed said that they have issued reports 

on climate change risks or weather-related losses. In addition, one of two 

reinsurance brokers we interviewed has reported on climate change risks 

and scientific assessments. The other reinsurance broker we interviewed 

has issued monthly and annual reports on natural catastrophe losses 

worldwide based on publicly available industry and climate data that 

cover topics associated with climate change, including trends in hurricane 

frequency, global temperatures, and weather-related losses.

Private insurers face several challenges to prepare for the long-term 

effects of climate change. One key challenge is similar to that identified 

by public insurers: the short-term nature of insurance contracts. Insurers 

generally write property coverage for 1-year terms. While short-term 

contracts allow insurers flexibility to manage their exposure to losses 

through (1) changes in coverage or pricing or (2) not renewing a particular 

policy, the annual period of each contract makes it challenging for 

insurers to incorporate long-term climate change projections into their risk 

management practices.

According to several industry representatives we interviewed, insurers 

and reinsurers use advanced computer modeling, known as catastrophe 

models, to help estimate risks and price insurance policies. While 

catastrophe modeling helps insurers and reinsurers estimate potential 

short-term weather-related losses, they said that incorporating the effects

of climate change into catastrophe models remains a challenge. 

According to a representative of a catastrophe modeling firm we 

interviewed, catastrophe models that insurers use to price policies 

generally estimate short-term risks based on historical weather data and 

Preparing for Long-Term 

Climate Change Effects is 

Challenging for Private 

Insurers
Page 27 GAO-15-28 Climate Change

past losses and not on long-term climate change projections.59 Many 

industry representatives said that advances in catastrophe modeling have 

improved risk measurement over time. However, estimating weatherrelated risks still includes elements of uncertainty, and catastrophe 

modeling information is limited for some weather-related risks. We 

interviewed representatives from two catastrophe modeling firms and a 

reinsurance broker that have developed models to estimate risks 

associated with hurricanes, including wind and storm surge impacts, as 

well as a model for estimating the effects of weather on crops. Several 

firms are developing catastrophe models for inland flood risk, which will 

help estimate potential flood risks, although FEMA officials and several 

industry representatives said these models are not yet advanced enough 

to allow insurers to estimate or price flood risk for individual properties.

Even with these challenges, several industry representatives said that, 

barring any additional regulatory restrictions, insurers and reinsurers are 

positioned to continue managing risks associated with climate change 

through their ability to set risk-based prices, write coverage, or manage 

exposure to losses. However, two reports by an industry group and 

academics have found that past catastrophic events have caused the 

private property casualty insurance market to retract following a major 

disaster, placing greater pressure on public insurers to provide coverage. 

For example, according to a 2012 Insurance Information Institute report, 

some insurers became insolvent or stopped writing coverage in certain 

areas following Hurricane Andrew in 1992 and, since then, Florida’s state 

insurer has grown from a market of last resort to the state’s largest 

insurer.

60 While some industry representatives we interviewed said 

insurers and reinsurers have successfully managed weather-related risks 

through underwriting, some said additional incentives are needed to help 

the private sector, government programs, and individuals manage their 

 59Two catastrophe modeling firms whose representatives we interviewed have developed 

hurricane models that include both historical weather information and projections based 

on sea surface temperature changes, but most catastrophe models are based on 

historical weather data and scenario-modeling based on previous weather events. 

60McChristian, Lynne, Hurricane Andrew and Insurance: The Enduring Impact of an 

Historic Storm (Tampa, FL: Insurance Information Institute, August 2012). 
Page 28 GAO-15-28 Climate Change

exposure to risks associated with climate change.61 For example, several 

industry representatives have said that South Carolina’s tax credit 

program for homeowners who fortify their homes to make them more 

resistant to hurricanes, catastrophic wind events, or flooding could 

encourage individuals to take steps to reduce their exposure to such 

risks.62

Some industry representatives we interviewed also suggested that 

federal, state, and local government adoption of building and land use 

practices that recognize potential climate change effects would help 

decrease both public and private exposure to insured and uninsured 

weather-related losses.63 For example, land use practices and zoning 

regulations that recognize potential climate change impacts could help 

reduce public and private exposure to climate change by limiting new 

construction or relocating existing structures from hazard-prone areas. In 

addition, several insurers and reinsurers we interviewed and other 

industry representatives have suggested that incentives are needed to 

encourage more state or local governments to adopt resilient building 

standards to help mitigate against weather-related losses. The Hurricane 

Sandy Rebuilding Task Force reported in August 2013 that using 

disaster-resistant building codes is the most effective method to ensure 

new and rebuilt structures are designed and constructed to a more 

 61Some insurers offer incentives to customers for mitigation. For example, one insurer we 

interviewed offers discounted premiums on homeowners’ insurance to homeowners that 

have taken steps to improve their structures ability to withstand strong winds and hail. In 

addition, Florida law requires insurers licensed in the state to offer discounts to 

homeowners who take certain steps to mitigate wind storm damage. Further, several 

industry representatives said insurers provide educational information to homeowners to 

encourage both mitigation and preparedness for risks associated with climate change 

such as hurricanes, floods, and wildfires. 

62South Carolina’s Omnibus Coastal Property Insurance Reform Act of 2007 provides 

state income tax credits for the costs a homeowner incurs to retrofit one’s home to make it 

more resistant to loss due to hurricanes, rising floodwaters, or other catastrophic 

windstorm events. S.C. Code Ann. § 12-6-3660. 

63As one industry group has reported, several states have not updated their building 

codes to reflect the most recent international standards. As such, these codes may not 

protect structures against current risk, regardless of climate change. See Insurance 

Institute for Business and Home Safety, Rating the States: An Assessment of Residential 

Building Code and Enforcement Systems for Life Safety and Property Protection in 

Hurricane-Prone Regions (Tampa, FL: Insurance Institute for Business and Home Safety, 

December 2011).
Page 29 GAO-15-28 Climate Change

resilient standard.64 The task force recommended that states and local 

governments adopt the most current building codes to ensure that 

buildings and other structures incorporate the latest science, advances in 

technology, and lessons learned. A representative from one industry 

group said updated and more resilient building codes, as well as 

improved enforcement measures, would help reduce exposure to 

weather-related risks including hurricanes, floods, wildfires, hail, and wind 

storms, which are associated with climate change. The industry group 

reported in December 2011 that while several hurricane-prone states, 

including Florida, Virginia, and New Jersey, have adopted more resilient 

building codes, opportunities exist for others to adopt stronger standards 

and better enforcement measures.65

To examine these and other issues, in November 2013, the President 

established a Task Force on Climate Preparedness and Resilience 

composed of state, local, and tribal leaders to advise the President and 

an interagency council on how the federal government can support state, 

local, and tribal preparedness for and resilience to climate change, 

among other things. The task force’s recommendations, expected in the 

fall of 2014 according to a White House press release, will address 

removing barriers to resilient investments—such as improving data and 

tools available to state and local decision makers, reforming existing 

policies and federal funding programs, and identifying opportunities to 

support more climate-resilient investments by states, local communities, 

and tribes.66

 64Hurricane Sandy Rebuilding Task Force, Hurricane Sandy Rebuilding Strategy: Stronger 

Communities, a Resilient Region (Hurricane Sandy Rebuilding Task Force, August 2013).

65Insurance Institute for Business and Home Safety, Rating the States (December 2011).

66According to White House press releases, in March 2014, the White House launched a 

Climate Data Initiative to leverage government resources and data to build tools that will 

make communities more resilient, in partnership with the private sector. In addition, in 

June 2014, senior administration officials met with a group of insurance and reinsurance 

industry leaders to discuss the economic consequences of increasingly frequent and 

severe extreme weather. The discussion centered on opportunities to share data between 

the federal government and the insurance industry to better communicate and reduce 

risks to policyholders, communities, and taxpayers. Participants also agreed to find ways 

to collaborate to create broader community resilience to strengthen neighborhoods and 

businesses. 
Page 30 GAO-15-28 Climate Change

FEMA and RMA have commissioned climate change studies, 

incorporated climate change adaptation into their planning, and taken 

other steps to address aspects of their federal flood and crop insurance 

programs that create fiscal exposures associated with climate change 

and extreme weather. However, the agencies continue to face 

fundamental challenges that send inaccurate price signals to 

policyholders about their potential risk of loss and increase federal fiscal 

exposure, and may unintentionally increase their policyholders’

vulnerability to climate change risks. We have previously concluded, 

among other things, that reducing subsidies and charging full-risk 

premiums to individual policyholders would decrease the federal 

government’s fiscal exposure under the flood and crop insurance 

programs.

Executive Order 13653 directs federal agencies to, consistent with their 

missions, reform policies that may, perhaps unintentionally, increase the 

vulnerability of natural or built systems, economic sectors, natural 

resources or communities to climate change. Regarding FEMA’s flood 

insurance program, the agency is phasing out most subsidies, and is 

studying how to incorporate the projected effects of climate change, such 

as future sea-level rise and erosion, into its flood maps, but the mapping 

advisory council’s recommendations aren’t expected until September 

2015. Until the agency implements these changes, some NFIP 

policyholders will continue to receive inaccurate signals about their 

current risk of loss, and all may not receive signals about their future risk 

of loss over the designed lifespan of their insured property. Furthermore, 

NFIP standards may not fully reflect policyholders’ long-term vulnerability 

to climate change because these standards are based on current risk that 

does not reflect future sea-level rise, erosion, or other changes. Without 

incorporating forward-looking minimum standards into NFIP’s 

construction and rebuilding requirements, similar to the minimum 

standard adopted by the Hurricane Sandy Rebuilding Task Force, NFIP 

policyholders and communities may continue to build and rebuild 

structures to current NFIP standards that do not necessarily reflect the 

changing weather-related risks faced over structures’ designed life 

spans—which could exacerbate federal fiscal exposure amid already 

strained federal resources.

In addition, a variety of agricultural practices are available to farmers that 

would improve their long-term resilience to climate change, such as 

practices that would promote long-term water conservation and soil 

conservation. However, federal crop insurance policyholders may receive 

inaccurate price signals about their current risks because of subsidized 

Conclusions
Page 31 GAO-15-28 Climate Change

premiums and because of the short-term nature of annual insurance 

contracts they may not receive signals that reflect the long-term 

implications of their short-term farming practice decisions. Additionally, 

federal law prohibits crop insurance from covering losses due to a 

farmers’ failure to follow good farming practices, although some of these 

practices may increase the vulnerability of agriculture to climate change, 

which may not reflect the direction contained in Executive Order 13653. 

Without working with agricultural experts to recommend or incorporate 

resilient agricultural practices into their expert guidance for growers’ good 

farming practices, RMA is likely missing an opportunity to decrease 

existing and future fiscal exposures to climate change. Consequently, 

crop insurance may continue to cover losses resulting from practices that 

increase vulnerability to climate change.

We are making two recommendations in this report.

• To promote forward-looking construction and rebuilding efforts while 

FEMA phases out most subsidies, we recommend that the Secretary 

of the Department of Homeland Security direct FEMA to consider

amending NFIP minimum standards for floodplain management to 

incorporate, as appropriate, forward-looking standards, similar to the 

minimum standard adopted by the Hurricane Sandy Rebuilding Task 

Force.

• To promote greater resilience to climate change effects in U.S. 

agriculture, we recommend that the Secretary of Agriculture direct 

RMA to consider working with agricultural experts to recommend or 

incorporate resilient agricultural practices into their expert guidance 

for growers, so that good farming practices take into account longterm agricultural resilience to climate change.

We provided a draft of this report to USDA, Commerce, DHS, and 

Treasury for review and comment. USDA provided written comments, 

which are reproduced in appendix II; Commerce provided technical 

comments, which we incorporated as appropriate; DHS provided written 

comments, which are reproduced in appendix III; and the Department of 

the Treasury did not provide comments. USDA did not specify their 

agreement or disagreement with our recommendation, and DHS agreed 

with our recommendation.

In its written comments, USDA referenced our finding that RMA’s good 

farming practices focus on maintaining historic crop yields over the term 

of the annual insurance contract and that some of these practices may 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 32 GAO-15-28 Climate Change

unintentionally increase the vulnerability of agriculture to climate change, 

contrary to Executive Order 13653’s directive for agencies to manage 

vulnerabilities to climate change. USDA stated that RMA does not direct 

producers to take or carry out certain agronomic practices, but rather 

relies on guidance from agricultural experts in the area. USDA also 

stated that to the extent that agricultural experts in an area recommend or 

incorporate resilient practice recommendations into their expert guidance 

for growers in a given area, then RMA would consider such in its good 

farming practice determination for coverage of losses. While RMA may 

not direct producers to follow certain agronomic practices, it can provide 

incentives for farmers' adoption of resilient practices by working with 

agricultural experts to recommend or incorporate resilient practices into 

their expert guidance for growers’ good farming practices and therefore 

eligibility determinations for claim payments. As we note in the report, 

RMA has an opportunity to potentially reduce agriculture's long-term 

vulnerability to climate change by encouraging the adoption of resilient 

practices now. For that reason, we recommend that RMA consider 

working with agricultural experts to recommend or incorporate resilient 

agricultural practices into their expert guidance for growers so that good 

farming practices take into account long-term agricultural resilience to 

climate change.

In addition, USDA refers to one of our identified program challenges to 

insurers that federal law encourages them to provide affordable insurance 

to policyholders through subsidized rates, which may reduce 

policyholders’ incentives to manage risk by giving them inaccurate signals 

about the level of risk. USDA states that, while the federal government 

does subsidize a significant share of a producer’s premium, every 

producer receives a notification from his or her insurance provider, which 

explains how much premium was paid by the government and how much 

is to be paid by the producer. Therefore, USDA states that all producers 

are made aware of the full risk. While notifying farmers of the subsidy 

amount provides useful information, farmers do not bear the true cost of 

their risk of loss. As a result, the market signal sent by federal insurers for 

the price of the policyholders’ risk is the amount the policyholders actually 

pay. We have modified the report and our recommendation to respond to 

USDA’s comments.

In its written comments, DHS concurred with our findings that FEMA has 

taken action to better understand and prepare for climate change’s 

potential effects and that FEMA faces challenges that may limit its ability 

to minimize long-term federal exposure to climate change.
Page 33 GAO-15-28 Climate Change

DHS also concurred with our recommendation to consider amending 

NFIP minimum standards for floodplain management to incorporate, as 

appropriate, forward-looking standards, similar to the minimum standard 

adopted by the Hurricane Sandy Rebuilding Task Force. In particular, 

DHS stated that FEMA has already taken action to consider amending 

NFIP minimum standards by (1) commissioning a 2006 study to assess 

the adequacy of the NFIP’s minimum standards, (2) participating in a 

2004 forum with key stakeholders about amending the NFIP minimum 

standards, and (3) encouraging communities to participate in the NFIP’s 

Community Rating System, which offers discounted flood insurance rates 

in exchange for a community’s proactive efforts to reduce its flood risk.67

We do not believe that these actions meet the intent of our 

recommendation for several reasons. First, commissioning a study and 

participating in a policy forum that discussed several aspects of NFIP 

minimum standards are not sufficient evidence that FEMA officials 

considered adopting forward-looking standards. FEMA has not provided 

documentation of internal policy discussions or other actions taken in 

response to the study or forum’s findings. Additionally, the study 

commissioned by FEMA is 8 years old, and it therefore does not reflect 

scientists’ current understanding of sea-level rise and other climate 

change effects identified in more recent National Climate Assessments. 

Similarly, the discussion with stakeholders occurred 10 years ago, and it 

therefore does not reflect the current state of the program, stakeholders’ 

current understanding of climate-related risks, the adequacy of FEMA’s 

floodplain maps, and recent advances in mapping technology. Moreover, 

the Community Rating System is voluntary and, as of March 2014, 1,296 

of the nearly 22,000 NFIP-participating communities are in the program. 

These communities represent about 67 percent of NFIP policyholders. 

Accordingly, amending the NFIP minimum standards could reach the over 

20,000 nonparticipating communities.

As the summary report from the 2004 forum notes, building in a margin of 

error such as adding a foot or more to the calculated base flood 

 67American Institutes for Research, Assessing the Adequacy of the National Flood 

Insurance Program’s 1 Percent Flood Standard, a report prepared under subcontract to 

the American Institutes for Research as part of the 2001-2006 Evaluation of the National 

Flood Insurance Program (October, 2006); and American State Floodplain Managers 

Foundation, Reducing Flood Losses: Is the 1% Chance Flood Standard Sufficient?, a 

report of the 2004 Assembly of the Gilbert F. White National Flood Policy Forum 

(September, 2004).
Page 34 GAO-15-28 Climate Change

evaluation for flood hazard assessment at the outset of the program could 

have avoided many of the program’s current problems regarding 

uncertainty—including the uncertainty of climate change. We continue to 

believe that FEMA should consider amending the NFIP minimum 

standards to incorporate, as appropriate, forward-looking standards, and 

we therefore do not consider the recommendation resolved and closed.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the 

appropriate congressional committees, the Secretary of Agriculture, the 

Secretary of Commerce, the Secretary of Homeland Security, the 

Secretary of Treasury, and other interested parties. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or gomezj@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix IV.

J. Alfredo Gómez

Director, Natural Resources and Environment
Page 35 GAO-15-28 Climate Change

List of Requesters

The Honorable Michael Bennet

Chairman, Subcommittee on Conservation, Forestry, and Natural 

Resources

Committee on Agriculture, Nutrition, and Forestry

United States Senate

The Honorable Sheldon Whitehouse

Chairman, Subcommittee on Oversight 

Committee on Environment and Public Works

United States Senate

The Honorable Jack Reed

Chairman, Subcommittee on Securities, Insurance, and Investment 

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Peter DeFazio

Ranking Member

Committee on Natural Resources

House of Representatives

The Honorable Thomas Harkin

United States Senate

The Honorable Tom Udall

United States Senate
Appendix I: Objectives, Scope, and 

Methodology

Page 36 GAO-15-28 Climate Change

To determine how federal and private sector exposure to losses has 

changed since our 2007 report on flood and crop insurance and how 

climate change has or may affect insured and uninsured losses, we 

analyzed federal and private sector exposure data from 2007 through 

2013. To understand longer-term trends in exposure, we also analyzed 

federal exposure data from 2000, and we reviewed scientific studies and 

other available literature on climate change. Specifically, we collected 

agency data on the total value of property insured under the National 

Flood Insurance Program (NFIP) and the federal crop insurance program. 

For the private sector, we collected estimates of the total value insured by 

property-casualty insurers—excluding auto—as determined by two 

industry catastrophe modeling firms, AIR Worldwide and Risk 

Management Solutions. We assessed the reliability of the agency and 

industry data we collected and determined it was sufficiently reliable for 

describing the total value of property insured.1 We also conducted a 

literature review to identify pertinent studies on how climate change has 

or may affect insured and uninsured losses. Specifically, we searched for 

scholarly articles, industry articles and reports, think-tank reports, 

conference reports, and government publications published from 2007 

onward. Through the literature search, we identified a number of studies 

that discussed climate change’s potential effects on insured and 

uninsured losses and stakeholder perspectives of climate change risks. 

For summarizing the effect of climate change on insured and uninsured 

losses, we limited our review to scientific, empirical studies that evaluated 

the historical loss record or projected future losses. Each of these studies 

used various techniques to discern the respective influences on the loss 

record of changes in exposure (e.g., wealth, population, insurance 

penetration) versus changes in weather patterns. Based on these criteria, 

we identified a total of 64 studies that were relevant and applicable to our 

report, 20 of which directly addressed the issue of climate change’s effect 

on losses. We reviewed the methodologies of these studies to ensure that 

they were sound and determined that they were sufficiently reliable for 

describing the potential effect of climate change on insured and uninsured 

losses.

 1

To assess the reliability of exposure data, we reviewed federal agency procedures for 

collecting and updating the data. For private sector exposure data, we compared 

exposure estimates from two separate firms. To assess the reliability of scientific studies, 

staff from our Center for Science, Technology and Engineering office and Center for 

Economics reviewed each study to determine whether their methodologies were sound 

and appropriate for our purposes.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-15-28 Climate Change

To determine how public insurers are preparing for climate change, we 

reviewed agency documents related to climate change. We reviewed the 

Department of Homeland Security’s (DHS) 2012 Climate Change 

Adaptation Roadmap, the 2011 Federal Emergency Management 

Agency’s (FEMA) Climate Adaptation Policy Statement, and a 2013 

AECOM climate change study which FEMA commissioned. We also 

reviewed the Risk Management Agency’s (RMA) 2012 Climate 

Adaptation Plan and 2011-2015 Strategic Plan, RMA’s cooperative 

agreement with Oregon State’s PRISM group, documents related to the 

agency’s 2011 rate change calculations, and a 2009 RTI climate change 

and modeling study which the agency commissioned. In addition, at the 

federal level, we interviewed officials from NFIP, RMA, the U.S. 

Department of Agriculture, the National Oceanic and Atmospheric 

Administration, the Federal Insurance Office, and Council on 

Environmental Quality. We also reviewed the Biggert-Waters Flood 

Insurance Reform Act of 2012, the Homeowner Flood Insurance 

Affordability Act of 2014, and the Agricultural Act of 2014. At the state 

level, we interviewed officials from the Department of Insurance in three 

states and the wind insurers in two of those three states. We selected a 

nonprobability sample of states based on the following factors: identified 

by an industry forecaster as most at-risk to natural disaster, whether the 

state had an insurance pool administered by a governmental entity or 

entity established pursuant to state law, and whether the state had 

experienced an extreme weather-related event in the past decade. 

Because we used a nonprobability sample to select states, our results are 

not generalizable to all 50 states; however, our results can provide 

illustrative information. We also spoke with several academic experts on 

agriculture and modeling identified from publications, other experts, and 

our prior work.

Further, to determine how private insurers and reinsurers are preparing 

for climate change, we reviewed over 20 industry reports and other 

information from industry representatives, and we interviewed a 

nonprobability sample of representatives from four insurers and four 

reinsurers, as well as catastrophe modeling firms, reinsurance brokers, 

and industry groups representing more than 1,000 large and small 

property casualty insurers. We selected a sample of four insurers to 

interview based on market share, experience with flood or crop insurance, 

and involvement in climate change issues. For insurers selected based 

on market share, we identified those with a large share of the U.S. 

property casualty market (about 50 percent cumulative share of the U.S. 

property casualty market) and others with a smaller share of the market 

(1 percent or less), based on 2012 industry data. Among these firms, we 
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-15-28 Climate Change

selected four insurers with diverse experience in the public and private 

insurance markets, and the four firms we interviewed represented over a 

25 percent share of the U.S. property and casualty insurance market, and 

a 15 percent share of the private crop insurance market. We also 

interviewed representatives from a sample of 4 reinsurers, from among 

10 reinsurance firms with the greatest share of the U.S. reinsurance 

market. The reinsurers we interviewed represented over a 30 percent 

share of the U.S. reinsurance market, based on 2012 industry data. In 

addition, we interviewed 11 other industry participants, as well as 

academic researchers for context. We identified industry participants to 

interview through our prior work and relevant publications, as well as 

suggestions from other interviewees. Industry participants we interviewed 

included representatives from two catastrophe modeling firms, two 

reinsurance brokerage firms, and seven industry groups representing 

insurers, reinsurers, and others. Among the industry groups we 

interviewed, two groups represented more than 1,000 large and small 

property casualty insurers. Because we used a nonprobability sample to 

select interviewees, our results are not generalizable to industry as a 

whole but provide illustrative examples.

We conducted this performance audit from November 2013 to October 

2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Comments from the U.S. 

Department of Agriculture

Page 39 GAO-15-28 Climate Change

Appendix II: Comments from the U.S. 

Department of Agriculture
Appendix II: Comments from the U.S. 

Department of Agriculture

Page 40 GAO-15-28 Climate Change
Appendix III: Comments from the U.S. 

Department of Homeland Security

Page 41 GAO-15-28 Climate Change

Appendix III: Comments from the U.S. 

Department of Homeland Security
Appendix III: Comments from the U.S. 

Department of Homeland Security

Page 42 GAO-15-28 Climate Change
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 43 GAO-15-28 Climate Change

J. Alfredo Gómez, (202) 512-3841 or gomezj@gao.gov

In addition to the individual named above, Michael Hix (Assistant 

Director), Charles Bausell, Alicia Puente Cackley, Heather Chartier, 

Kendall Childers, Melinda Cordero, John Delicath, Steven Elstein,

Diantha Garms, Cindy Gilbert, Kathryn Godfrey, Susan Irving, Richard 

Johnson, Jessica Lemke, Armetha Liles, Susan E. Offutt, Jeanette 

Soares, Vasiliki Theodoropoulos, Frank Todisco, Lisa Van Arsdale, 

Patrick Ward, Eugene Wisnoski, and Franklyn Yao made important 

contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(361517)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.

Visit GAO on the web at www.gao.gov.

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.