Climate change could increase exposure to crop insurance losses, GAO report says
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WASHINGTON, Nov. 20, 2014 - Climate change could make both government and private sector players in the crop insurance program more vulnerable to potential losses, a report released today by the Government Accountability Office (GAO) said.
The report, which discussed flood and crop insurance, said “exposure growth in hazard-prone areas has increased losses” and went on to say climate change may only make the problem worse. Between 2007-2013, the report said data from the Risk Management Agency (RMA) and the Federal Emergency Management Agency (FEMA) showed an increase of 8 percent in exposure to potential losses for insured property, an increase of about $100 million. The impact was felt to a greater degree in the private sector, where losses took a 10 percent jump, totaling about $5.8 trillion from 2007-2012.
GAO studies say climate change “may substantially increase losses by 2040 and increases losses from about 50 to 100 percent by 2100.”
“(FEMA and RMA) face challenges that may limit their ability to minimize long-term federal exposure to climate change,” the report summary said, specifically mentioning concerns having to do with flood insurance. “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.”
The report also mentions crop insurance law prohibiting covering losses incurred due to a farmer's failure to follow “good farming practices” that can affect both short-term and long-term vulnerability of the land to further crop insurance claims. The report said if action isn't taken to address the long-term issues that could arise from short-term action taken by some homeowners and agricultural producers, the federal programs could end up paying higher dividends in the future.
“Without encouraging (National Flood Insurance Program) and crop insurance policy holders 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 . . . which could exacerbate federal exposure to losses.”
To see the full report, click here.
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