[Senate Hearing 112-181]
[From the U.S. Government Publishing Office]
S. Hrg. 112-181
FEDERAL DISASTER ASSISTANCE BUDGETING: ARE WE WEATHER-READY?
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HEARING
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
SPECIAL HEARING
JULY 28, 2011--WASHINGTON, DC
__________
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COMMITTEE ON APPROPRIATIONS
DANIEL K. INOUYE, Hawaii, Chairman
PATRICK J. LEAHY, Vermont THAD COCHRAN, Mississippi, Ranking
TOM HARKIN, Iowa MITCH McCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin KAY BAILEY HUTCHISON, Texas
PATTY MURRAY, Washington LAMAR ALEXANDER, Tennessee
DIANNE FEINSTEIN, California SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota LINDSEY GRAHAM, South Carolina
MARY L. LANDRIEU, Louisiana MARK KIRK, Illinois
JACK REED, Rhode Island DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey ROY BLUNT, Missouri
BEN NELSON, Nebraska JERRY MORAN, Kansas
MARK PRYOR, Arkansas JOHN HOEVEN, North Dakota
JON TESTER, Montana RON JOHNSON, Wisconsin
SHERROD BROWN, Ohio
Charles J. Houy, Staff Director
Bruce Evans, Minority Staff Director
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Subcommittee on Financial Services and General Government
RICHARD J. DURBIN, Illinois, Chairman
FRANK R. LAUTENBERG, New Jersey JERRY MORAN, Kansas
BEN NELSON, Nebraska MARK KIRK, Illinois
DANIEL K. INOUYE, Hawaii (ex THAD COCHRAN, Mississippi (ex
officio) officio)
Professional Staff
Marianne Upton
Diana Gourlay Hamilton
Melissa Z. Petersen
Dale Cabaniss (Minority)
Ellen Beares (Minority)
LaShawnda Smith (Minority)
Administrative Support
Nora Martin
C O N T E N T S
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Page
Opening Statement of Senator Richard J. Durbin................... 1
Prepared Statement of........................................ 5
Prepared Statement of Howard Kunreuther and Erwann Michel-Kerjan. 6
Natural Disasters Impose Severe Economic Losses.................. 6
Why Are Disaster Losses Increasing?.............................. 6
Increasing Role of Federal Disaster Assistance................... 7
Reducing Exposure to Losses From Disasters....................... 7
Why Individuals do not Protect Themselves Against Potential
Disasters...................................................... 8
The Key Role of Insurance........................................ 9
Our Proposal: A Multi-year Insurance-Risk Reduction Loan Program. 10
Lessons From an Energy Efficiency Program........................ 10
We Need To Act Now............................................... 11
Catastrophe Modeling and the Exceedance Probability Curve........ 11
Usefulness of the EP Curve....................................... 12
About RMS........................................................ 13
Insuring Flood Risk.............................................. 13
Devastating Losses Require Better Insurance...................... 14
Limits of the NFIP as Currently Designed......................... 14
Better Tools for Disaster Financing.............................. 15
Letter From the Center for American Progress Action Fund......... 16
Statement of Senator Jerry Moran................................. 19
Statement of David C. Trimble, Director, Natural Resources and
Environment, Government Accountability Office.................. 20
Prepared Statement of........................................ 21
Climate Change Adaptation........................................ 21
Federal, State, and Local Authorities are Beginning To Take Steps
To Adapt to Climate Change..................................... 22
Why the GAO Did This Study....................................... 28
What GAO Found................................................... 28
Statement of Kathryn D. Sullivan, Ph.D., Assistant Secretary of
Commerce for Environmental Observation and Prediction, National
Oceanic and Atmospheric Administration, Department of Commerce. 29
Prepared Statement of........................................ 31
Depiction of Gulf of Mexico Hypoxia Zone Image...................33, 64
What it Means.................................................... 33
The Various Roles of NOAA........................................ 34
Achieving a Weather- and Water-ready Nation...................... 36
Statement of James Rivera, Associate Administrator, Office of
Disaster Assistance, Small Business Administration............. 38
Prepared Statement of........................................ 40
The SBA's Role in Responding to a Disaster....................... 41
Budget Formulation Subsidy Estimates............................. 41
Additional Resources............................................. 41
Significant Improvements Since Hurricane Katrina................. 42
Statement of Dr. Donald J. Wuebbles, The Harry E. Preble
Professor of Atmospheric Sciences, University of Illinois-
Urbana, Illinois............................................... 43
Prepared Statement of........................................ 45
Statement of Franklin W. Nutter, President, Reinsurance
Association of America......................................... 50
Prepared Statement of........................................ 52
Questions Submitted by Senator Richard J. Durbin................. 68
Questions Submitted to Kathryn D. Sullivan, Ph.D................. 68
Questions Submitted to David C. Trimble.......................... 72
Dangers and Drawbacks of Fragmented Management................... 72
Addressing Government Challenges by Adapting Private Sector Tools 73
FEDERAL DISASTER ASSISTANCE BUDGETING: ARE WE WEATHER-READY?
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THURSDAY, JULY 28, 2011
U.S. Senate,
Subcommittee on Financial Services
and General Government,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 2 p.m., in room SD-138, Dirksen
Senate Office Building, Hon. Richard Durbin (chairman),
presiding.
Present: Senators Durbin and Moran.
OPENING STATEMENT OF SENATOR RICHARD J. DURBIN
Senator Durbin. I'm pleased to convene this hearing to
investigate the Federal Government's responsibilities in terms
of dealing with long-term planning to mitigate the economic
impact of severe weather events. I welcome my distinguished
ranking member, Senator Jerry Moran of Kansas. Other colleagues
may join us on the dais today. And they will be invited to send
in written questions if they're not in attendance personally.
Joining us today to contribute to the conversation are
public officials and experts in disaster relief and catastrophe
modeling from the Government, business, and scientific realm.
Our first witness is going to be David C. Trimble, Director
of the Natural Resources and Environmental Group with the
Government Accountability Office (GAO).
Our second witness is Kathryn D. Sullivan, Ph.D., Deputy
Administrator and Assistant Secretary of Commerce for
Environmental Observation and Prediction at the National
Oceanographic and Atmospheric Administration (NOAA).
Incidentally, Dr. Sullivan was the first woman to walk in space
and previously served as the NOAA's chief scientist.
Our next witness is James Rivera, associate administrator
for the Office of Disaster Assistance at the SBA.
Our fourth witness is Dr. Donald J. Wuebbles. He is an
endowed professor at the University of Illinois and recipient
of the 2007 Nobel Prize for his work with the intergovernmental
panel on climate change. On a prouder note, Dr. Wuebbles is an
Illinois native, son of a farmer, raised in Clinton County,
Carlyle, Illinois. Glad that you're here.
Our final witness is Franklin W. Nutter, president of the
Reinsurance Association of America.
A famous political philosopher named Robert Allen
Zimmerman, a.k.a. Bob Dylan, once said, you don't have to be a
weatherman to know which way the wind is blowing. And we are
going to discuss today how the wind is blowing in terms of
weather events and whether we're prepared for it.
According to the NOAA's National Climate Data Center
(NCDC), the United States has already experienced eight natural
disasters, with damages totaling more than $1 billion this
year--eight. The previous record for weather-related disasters
of this magnitude was nine in one year. We're almost at that
point and it's only July.
[The information follows:]
NATURAL DISATSER LOSSES IN THE UNITED STATES--FIRST SIX MONTHS OF 2011
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Number of Estimated Estimated
Event (As of July 6, 2011) events Fatalities overall losses insured losses
----------------------------------------------------------------------------------------------------------------
Severe thunderstorm............................. 43 593 $23,573 $16,350
Winter storm.................................... 8 15 1,900 1,425
Flood........................................... 8 15 2,100 ( \1\ )
Earthquake...................................... 2 1 105 ( \1\ )
Tropical cyclone................................ .............. .............. .............. ..............
Wildfire........................................ 37 7 125 50
----------------------------------------------------------------------------------------------------------------
\1\ In progress.
Source.--MR NatCatSERVICE.
I fly home to Illinois every weekend. I can tell you that,
during the last 6 months, I've seen it all. Chicago and
Illinois have experienced blizzards, tornadoes, blistering
heat, and severe flooding.
In February, just a few months back now, Chicago--the
third-largest city in the United States--was shut down with 2
feet of snow overnight, 60 mile-per-hour winds that hammered
the city. That blizzard caused 36 deaths and more than $3.9
billion in damage. This spring, tornadoes damaged homes and
businesses throughout our State.
In May, flooding along the Ohio River was so severe, the
Army Corps of Engineers was forced to blow a levy in Missouri
to prevent homes in Cairo, Illinois, from being completely
destroyed.
Last Friday night, as I was telling Senator Moran, I was
awakened by what I thought was a storm. It sure was. It dumped
almost 7 inches of rain in a little more than an hour, the
largest single 1-day rainfall in the history of recorded
weather in the city of Chicago. The Metropolitan Water
Reclamation District was forced to release untreated sewage
into Lake Michigan. The system was overwhelmed.
Last night, several parts of Illinois suffered severe
rainstorms that caused the evacuation of hundreds of people and
two fatalities. July is now the wettest month in the 122 years
of Chicago's recorded history.
Illinois is not alone in these notable weather events.
We've seen droughts in Texas, wildfires in Arizona and New
Mexico, flooding in Tennessee, and according to Senator Moran,
both drought and flooding in his State.
Today, there are excessive heat warnings in more than 20
communities throughout Kansas, Senator Moran's home State, and
flood warnings along the Missouri River.
In 2011 alone, almost $28 billion in damages have already
been caused by catastrophic events, and hurricane season is
just starting. The economic impact of severe weather events is
only projected to grow in future years as the frequency and
intensity of weather events continues to grow.
As this chart will show you, the weather is getting worse
and more violent; catastrophic, in fact. The Federal Government
needs to do more to be ready to protect Federal assets and to
provide disaster assistance on an increasing frequency.
Source.--MR NatCatSERVICE.
Are we ready? Well, the private insurance industry is. I
was surprised, Mr. Nutter, in visiting some of the leaders in
your business, a year or two ago, and realizing how closely
they follow weather and weather patterns, principally if
they're in the property and casualty realm. And they make
business decisions about risk, and whether or not the risks are
going to increase to the point where premiums have to go up or
they stop writing insurance. And they make those decisions on a
regular basis.
You're thinking ahead. I'm not sure the Federal Government
is thinking ahead when it comes to our preparedness for
disasters. Private insurers handled $89 billion in losses,
sustained by 5.5 million policyholders, in the 2004 and 2005
hurricane seasons without any significant setbacks.
Given the industry's success, I want to see if there are
budgeting practices the Federal Government could adapt from the
private sector to better forecast how we budget for disaster
assistance efforts.
Another chart we can put up here, the SBA's Disaster Loan
Program provides a good example of the sporadic Federal
budgeting associated with natural disasters. Historically, loan
volumes under the program average $1 billion a year.
However, the actual amount fluctuates greatly from year to
year and often differs significantly from the long-term
average. In years with multiple catastrophic events, we are
left scrambling to fund relief programs in the short term. In
the meantime, we're not focusing strategically on the long-term
Federal budgetary impact of what we know is happening,
increasingly severe weather events.
With the potential for more severe disasters occurring with
greater frequency, I have called this hearing to explore the
Federal Government's planning for spending on disaster relief.
I don't know that other committees are considering this, but
because of our appropriations responsibility, with at least one
of the agencies affected, I've tried to coordinate other
Federal agencies in this conversation.
PREPARED STATEMENTS
The cumulative expected exposure of the U.S. Government to
weather-related disasters over the next 75 years could reach $7
trillion with inflation. If we hope to put this country on a
sustainable fiscal path, we need to be prepared to manage this
increase in natural catastrophe. We can learn from the private
sector how to better prepare.
I ask unanimous consent that the submitted testimonies of
Howard Kunreuther and Erwann Michel-Kerjan, and Risk Management
Solutions, as well as a copy of an article entitled Redesigning
Flood Insurance that appeared in Science magazine on July 22 be
part of the permanent record of this hearing. At this point,
I'd like to turn it over to my colleague and friend, Senator
Moran.
[The statements follow:]
Prepared Statement of Senator Richard J. Durbin
Good afternoon. I am pleased to convene this hearing to investigate
how the Federal Government could improve its long-term planning to
mitigate the economic impacts of severe weather events.
I welcome my distinguished ranking member, Senator Jerry Moran,
other colleagues who have joined me on the dais today, and others who
may arrive during the course of these proceedings.
Joining us today to contribute to this conversation are public
officials and experts in disaster relief and catastrophe modeling from
the government and scientific realms.
Our first witness is David C. Trimble, Director of the Natural
Resources and Environment Group at the Government Accountability
Office.
Our second witness is Kathryn D. Sullivan, Ph.D., Deputy
Administrator and Assistant Secretary of Commerce for Environmental
Observation and Prediction at the National Oceanic and Atmospheric
Administration (NOAA).
Dr. Sullivan was the first woman to walk in space and previously
served as NOAA's chief scientist.
Our next witness is James Rivera, Associate Administrator for the
Office of Disaster Assistance at the Small Business Administration
(SBA).
Our fourth witness is Dr. Donald J. Wuebbles. He is an endowed
professor at the University of Illinois and recipient of the 2007 Nobel
Peace Prize for his work with the Intergovernmental Panel on Climate
Change.
And--I am proud to note--Professor Wuebbles in an Illinois native.
He is the son of a farmer and was raised in Carlyle, Illinois.
Our final witness is Franklin W. Nutter, President of the
Reinsurance Association of America.
According to the NOAA's National Climate Data Center, the United
States has already experienced eight natural disasters with damages
totaling more than $1 billion this year.
The previous record for weather-related disaster of this magnitude
was nine in one year. We are almost at that point, and it is only July.
I fly home to Illinois almost every weekend. I can tell you that
during the last 6 months, Illinois has experienced blizzards, tornados,
blistering heat and severe flooding.
In February, Chicago--the third-largest city in the United States--
was shut down as 2 feet of snow fell overnight and 60 mile per hour
winds hammered the city.
The blizzard caused 36 deaths and more than $3.9 billion in damage.
This spring, tornados damaged homes and businesses throughout
Illinois.
In May, flooding along the Ohio River was so severe that the Army
Corps of Engineers was forced to demolish a levee to prevent homes in
Cairo, Illinois, from being completely destroyed.
This past weekend, 7 inches of rain fell on Chicago in 1 day, the
largest recorded single-day rainfall in history. The Metropolitan Water
Reclamation District was forced to release untreated sewage into Lake
Michigan and to close nearby beaches.
And last night, several parts of Illinois suffered severe
rainstorms that caused the evacuation of hundreds of people and two
fatalities.
July is now the wettest month in the 122 years of Chicago's
recorded history.
And Illinois is not alone. We've seen drought in Texas, wildfires
in Arizona, and flooding in Tennessee.
Today, there are excessive heat warnings in more than 20
communities throughout Kansas--Senator Moran's home State--and flood
warnings along the Missouri River.
In 2011 alone, almost $28 billion in damages have already been
caused by catastrophic events--and hurricane season is just beginning.
And the economic impact of severe weather events is only projected
to grow in future years as the frequency and intensity of weather
events continues to grow.
The weather is getting worse, catastrophic in fact. The Federal
Government needs to do more to be ready to protect Federal assets and
provide disaster assistance on an increasing frequency.
Is the Federal Government prepared for this?
The private insurance industry is.
These companies have stayed financially stable despite a dramatic
increase in property losses in recent years.
Private insurers handled $89 billion in losses sustained by 5.5
million policyholders in the 2004 and 2005 hurricane seasons without
any significant setbacks.
Given the industry's success, I'd like to see whether there are any
budgeting practices that the Federal Government could adapt from the
private sector to better forecast how we budget for disaster assistance
efforts.
The SBA's Disaster Loan Program provides a good example of the
sporadic Federal budgeting associated with natural disasters.
Historically, loan volumes under the program average $1 billion a
year. However, the actual amount fluctuates greatly from year-to-year
and often differs significantly from the long-term average.
In years with multiple catastrophic events, we are left scrambling
to fund relief programs in the short term.
But, in the meantime, we're not focusing strategically on the long-
term budgetary impacts of what we know is happening--increasingly
severe weather events.
With the potential for more severe disasters occurring with greater
frequency in the future, I have called this hearing to explore the
Federal Government's planning for spending on disaster relief.
The cumulative expected exposure of the U.S. Government to weather-
related disasters over the next 75 years could reach $7 trillion, with
inflation.
If we hope to put this country on a sustainable fiscal path, we
need to be prepared to manage this increase in natural catastrophes.
We can learn from the private sector how to better prepare for the
economic impact of severe weather.
______
Prepared Statement of Howard Kunreuther and Erwann Michel-Kerjan
Chairman Durbin and Ranking Member Moran: We are very pleased that
you are holding this hearing to examine the costs to the Federal
Government associated with natural disasters and steps that could be
taken to reduce those costs. We agree that this is an increasingly
important subject to understand and address. We, Howard Kunreuther and
Erwann Michel-Kerjan, have conducted considerable research in these
areas at the Center for Risk Management and Decision Processes of The
Wharton School at the University of Pennsylvania. It is a pleasure to
share our observations and recommendations with you.
NATURAL DISASTERS IMPOSE SEVERE ECONOMIC LOSSES
In recent years we have witnessed a dramatic increase in the
economic cost and death toll from hurricanes, earthquakes, floods, and
other natural disasters worldwide. Economic losses from these
catastrophic events increased from $528 billion (1981-1990) to more
than $1.2 trillion over the period 2001-2010.\1\
---------------------------------------------------------------------------
\1\ Data from Munich Re and Swiss Re.
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Although we are only halfway through 2011, an exceptional number of
very severe natural catastrophes, notably the Japanese earthquake and
tsunami, makes 2011 the highest economic loss year on record. In the
United States, the Southern and Midwestern States were hit by an
exceptionally severe series of tornadoes in April and May. Around this
time, heavy snowmelt, saturated soils, and more than 20 inches of rain
in a month led to the worst flooding of the lower Mississippi River
since 1927 with extensive agricultural damage, property, and inland
marine losses. The U.S. National Hurricane Center at the National
Oceanic and Atmospheric Administration forecast in May that the 2011
hurricane season would have above-average activity in the Atlantic
basin.\2\
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\2\ NOAA hurricane outlook indicates an above-normal Atlantic
season (2011). Available at: http://www.noaanews.noaa.gov/stories2011/
20110519_atlantichurricaneoutlook.html. May 19, 2011.
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Given the increasing losses from natural disasters in recent years,
it is surprising how few property owners in hazard-prone areas have
invested in loss reduction measures. We propose a program that will
address this issue directly and hence reduce the need for Federal
disaster assistance in the future.
WHY ARE DISASTER LOSSES INCREASING?
There are at least two principal socio-economic factors that
directly influence the level of economic losses due to catastrophe
events: exposed population and value at risk. The economic development
of Florida highlights this point. According to the U.S. Bureau of the
Census, the population of that State has increased significantly over
the past 50 years: 2.8 million inhabitants in 1950, 6.8 million in
1970, 13 million in 1990, and 18.8 million population in 2010 (almost a
570 percent increase since 1950). A significant portion of that
population increase lives in high hazard areas of the coast. There is
thus an increased likelihood of severe economic and insured losses in
Florida unless cost-effective mitigation measures are implemented.
Recent climate studies indicate we should also expect more extreme
weather-related events in the future.\3\ The questions that need to be
addressed directly by the Congress and other interested parties are:
---------------------------------------------------------------------------
\3\ P.C.D. Milly, Julio Betancourt, Malin Falkenmark, Robert M.
Hirsch, Zbigniew W. Kundzewicz, Dennis P. Lettenmaier, and Ronald J.
Stouffer, Science 319, 573 (2008); Knutson, T., J. McBride, J. Chan, K.
Emanuel, G. Holland, C. Landsea, I. Held, J. Kossin, A.K. Srivastava
and M. Sugi. Tropical Cyclones and Climate Change. Nature Geoscience 3,
157-163. (2010).
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--Who will pay for these massive losses?
--What actions need to be taken now so our country is more resilient
WHEN THESE DISASTERS OCCUR (AS THEY WILL) IN THE FUTURE?
INCREASING ROLE OF FEDERAL DISASTER ASSISTANCE
Not surprisingly, the disasters that occurred in now much more
populated areas of the United States have led to historical levels of
insurance claim payments \4\ as well as a surge in the number of
Presidential disaster declarations. In an article published last week
in Science about reforming the federally run National Flood Insurance
Program (NFIP), we showed that the number of major disaster
declarations increased from 252 during the period 1981-1990, to 476
(1991-2000) and 597 during the period 2001-2010. In 2010 alone, there
were 81 such major disaster declarations.\5\
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\4\ See H. Kunreuther and E. Michel-Kerjan (2009), At War with the
Weather MIT Press, for a detailed analysis.
\5\ E. Michel-Kerjan and H. Kunreuther (2011). Reforming Flood
Insurance. Science 333, 408-409, July 22.
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American taxpayers paid $89 billion in relief in the aftermath of
the 2005 hurricane season (2010 prices). This figure was actually
greater than the combined amount that private insurers and reinsurers
paid for wind-related insured losses due to Hurricanes Katrina, Rita,
and Wilma.\6\ This more pronounced role of the Federal Government in
assisting disaster victims can also be seen by examining several major
disasters that occurred in the past 50 years as shown in the table
below.\7\
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\6\ The figure does not include the $17 billion paid by the NFIP
for flood insurance claims for Hurricane Katrina, most of which had to
be borrowed from the U.S. Treasury.
\7\ E. Michel-Kerjan and J. Volkman-Wise (2011). The Risk of Ever-
Growing Disaster Relief Expectations. Wharton Risk Center Working Paper
#2011-09. Available at http://opim.wharton.upenn.edu/risk/papers.php
------------------------------------------------------------------------
Federal aid as a
Disaster percentage of total
damage
------------------------------------------------------------------------
Hurricane Ike (2008)........................... 69
Hurricane Katrina (2005)....................... 50
Hurricane Hugo (1989).......................... 23
Hurricane Diane (1955)......................... 6
------------------------------------------------------------------------
Each new massive Government disaster relief program creates a
precedent. As a result, not only are there expectations when a disaster
strikes that governmental assistance is on the way, but in order to
gain politically from their actions, Members of Congress are likely to
support bills that authorize more aid than for past disasters. If
residents of hazard-prone areas expect more Federal relief following
future disasters, they then have less economic incentive to reduce
their own exposure and/or purchase insurance.
REDUCING EXPOSURE TO LOSSES FROM DISASTERS
Today, we can more accurately estimate the risks that different
communities and regions face from natural hazards. We are able to
reduce potential disaster losses through mitigation measures and know
that insurance can provide financial protection to those in harm's way,
thus lowering the financial burden on taxpayers and increasing personal
responsibility. Yet many residents in hazard-prone areas are still
unprotected against earthquakes, floods, hurricanes, and tornados.
We address the following question: How do we reduce the exposure of
property to losses from natural disasters and hence reduce the need for
disaster assistance following future catastrophes?
We first focus on why many residents in hazard-prone areas do not
protect themselves against disasters (which often starts with their
moving to high-risk areas--a behavioral perspective). We then propose a
course of action that overcomes these challenges (a policy
perspective). Specifically, we believe that multi-year disaster
insurance contracts tied to the property and combined with risk
reduction loans will lead many more individuals to invest in protection
and thus be in a much better financial position to recover on their own
following the next disaster. The proposed program should thus reduce
the need for disaster assistance and be a win-win situation for all the
relevant stakeholders compared to the status quo. Current energy
efficiency programs can serve as a model for our proposal.
WHY INDIVIDUALS DO NOT PROTECT THEMSELVES AGAINST POTENTIAL DISASTERS
\8\
---------------------------------------------------------------------------
\8\ The material in this section is based on Kunreuther and Michel-
Kerjan (2010) ``Overcoming Myopia'' Milken Review, Fourth Quarter, pp.
48-57. More detail on these behavioral biases appears in Kunreuther,
Meyer and Michel-Kerjan (in press). ``Overcoming Decision Biases to
Reduce Losses from Natural Catastrophes''. In E. Shafir (ed.)
Behavioral Foundations of Policy. Princeton, NJ: Princeton University
Press.
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There is growing empirical evidence from psychology and behavioral
economics that many decisionmakers ignore the potential consequences of
large-scale disasters for the following reasons:
Misperceptions of the Risk.--We often underestimate the
likelihood of natural disasters by treating them as below our
threshold level of concern. By failing to create scenarios in
which a flood or earthquake may plausibly occur, there is no
interest in undertaking protective actions such as purchasing
insurance or investing in loss reduction measures.
Ambiguity of Experts.--There are sometimes differences in
experts' estimates of the likelihood and consequences of low-
probability events caused by limited historical data,
scientific uncertainty, changing environmental conditions due
to increased development and/or the use of different risk
models. The variance in risk estimates creates confusion by the
general public, Government entities, and businesses as to
whether one needs to pay attention to this risk. In fact,
decisionmakers often utilize estimates from their favorite
experts that provide justifications for their proposed actions.
Short Horizons for Valuing Protective Measures.--Many businesses
and households project only a few years ahead (if not just
months) when deciding whether to spend money on loss-reduction
measures such as anchoring their roofs to reduce hurricane
damage. By focusing on the short-term returns, they fail to
invest in risk-reducing measures that could be justified
financially when comparing costs and expected returns over the
expected life of the property. In other words, cost-effective
mitigation measures are often disregarded due to myopic
behavior.
Procrastination.--If given an option to postpone an investment
for 1 month or 1 year, there will be a tendency to delay the
outlay of funds. When viewed from a temporal distance the
investment will always seem worthwhile, but when it comes time
to undertaking the work, the prospect of a slight delay always
seems more attractive. Moreover, the less certain one is about
a correct course of positive action, the more likely one is to
choose inaction. There is a tendency to favor the status quo--
to not change whatever one is doing now.
Mistakenly Treating Insurance as an Investment.--Individuals
often do not buy insurance until after a disaster occurs and
then cancel their policies several years later because they
have not collected on their policy. They perceive insurance to
be a bad investment by not appreciating the adage that the
``best return on an insurance policy is no return at all.''
Failure To Learn From Past Disasters.--There is a tendency to
discount past unpleasant experiences. Emotions run high after
experiencing a catastrophic event or even viewing it on TV or
the Internet. But those feelings fade rapidly, making it
difficult to recapture these concerns about the event as time
passes.
Mimetic Blindness.--Decisionmakers often imitate the behavior of
others without analyzing whether the action is appropriate for
them. By looking at what other firms do in their industry, or
pursuing the actions of their friends and neighbors,
decisionmakers can avoid having to think independently.
In addition to these behavioral biases, there are economically
rational reasons as to why firms and individuals in hazard-prone areas
do not undertake risk-reduction measures voluntarily. Consider the
hypothetical Safelee firm in an industry in which its competitors do
not invest in loss prevention measures. Safelee might understand the
investment can be justified when considering how it reduces the risks
and consequences of a future disaster. However, during normal times,
the firm might be at a competitive disadvantage because it cannot match
the cost structure of its competitors. The behavior of many banks in
the years preceding the financial crisis of 2008-2009 is illustrative
of such a dynamic.
Families considering whether to invest in disaster prevention may
also find the investment to be unattractive financially if they plan on
moving in a few years and if they believe that potential buyers will
not take into account the lower risk of a disaster loss when deciding
how much they are willing to pay for the property. More generally,
families might have other rational reasons for not purchasing disaster
coverage or investing in risk-reduction measures when this expense
competes with other needs that have to be satisfied with a limited
budget (living expenses, education, taxes, other insurance coverage,
etc.). This aspect has more significance today given the current
economic situation the country faces and the high level of
unemployment.
THE KEY ROLE OF INSURANCE
Our proposed program for reducing disaster losses and the need for
the Government to provide assistance to the affected communities
directly addresses these behavioral concerns by providing incentives
for people and firms to become more resilient. Insurance can play a
central role by doing three things. First, if priced appropriately,
insurance provides a signal of the risk an individual or a firm faces
in their current location. Second, insurance can encourage property
owners in hazard-prone areas to invest in mitigation measures by
providing them with premium reductions to reflect the expected
reduction in losses from future disasters. Third, insurance supports
economic resiliency: following a disaster an insured individual or firm
can make a claim to obtain funds to help pay for the loss caused by the
catastrophe and get back on their feet much more quickly than if they
were forced to rely on Federal disaster assistance.
For insurance to play this role, in combination with other programs
involving the public and private sectors, we feel it is important that
the following two guiding principles \9\ be adhered to:
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\9\ More details on these principles appear in H. Kunreuther and E.
Michel-Kerjan, At War with the Weather (MIT Press), (2009).
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Principle 1.--Premiums should reflect risk. Insurance premiums
should be based on risk in order to provide signals to
individuals about the hazards they face and to encourage them
to engage in cost-effective mitigation measures that reduce
their vulnerability to catastrophes. Risk-based premiums should
also reflect the cost of capital that insurers must integrate
into their pricing in order to meet solvency requirement from
rating agencies and insurance regulators, and to also assure
adequate return to their investors.
Risk-based premiums will provide a clear signal of likely damage
to those currently residing in hazard-prone areas as well as
those considering locating there. Risk-based premiums also
enable insurers to provide discounts to homeowners and
businesses that invest in cost-effective mitigation measures.
If insurance premiums are not risk-based, insurers are unlikely
to offer any premium discounts for those who adopt mitigation
measures. In fact, they often prefer not to offer coverage to
these property owners because it will be a losing proposition
in the long run.
Principle 2.--Equity and affordability issues should be
addressed. This principle reflects a concern for some residents
in high-hazard areas who will be faced with large premium
increases based on Principle 1. However, any special treatment
given to homeowners currently residing in hazard-prone areas
(e.g., low-income uninsured or inadequately insured homeowners)
should be funded through an insurance voucher not through
premium subsidies (as is often done today).
The offer of insurance vouchers applies only to needy individuals
who currently reside in a hazard-prone area. Those deciding to
move into the area in the future should be charged premiums
that reflect the risk. If they were provided with financial
assistance to purchase insurance, this would encourage
development in hazard-prone areas and exacerbate the potential
for catastrophic losses from future disasters.
our proposal: a multi-year insurance-risk reduction loan program
Given the behavioral biases and budget constraints individuals
face, we propose that insurance and other protective measures be tied
to the property rather than the property owner. We recommend the
following five features of such a program using the two guiding
principles for insurance as a basis for its design:
Multi-year Insurance Tied to Property.--When an individual or
businesses purchases a piece of property, they should have an
opportunity to purchase a multi-year insurance contract (for
example, 5 years) at a fixed annual premium that reflects the
risk. At the end of the multi-year contract, the premium could
be revised to reflect changes in the risk (higher or lower).
Vouchers for Those Needing Special Treatment.--We recommend a new
disaster insurance voucher program to address issues of equity
and affordability to complement the strategy of risk-based
premiums for all. Property owners currently residing in a risky
area who require special treatment would receive a voucher by
the Federal Emergency Management Agency or the U.S. Department
of Housing and Urban Development (HUD) as part of its budget or
through special appropriation. This program would be similar to
the Supplemental Nutrition Assistance Program (``food stamps'')
and the Low Income Home Energy Assistance Program, which in the
United States enables millions of low-income households to meet
their food and energy needs every year. The size of the voucher
will be determined through a means-test in much the way that
distribution of food stamps is determined today.
Required Insurance.--Since individuals tend to treat insurance as
an investment rather than a protective mechanism, it may have
to be a requirement for property located in hazard-prone areas,
given the large number of individuals who do not have coverage
today.
There is empirical evidence supporting the third feature of the
proposed program. Data from HUD reveal that 41 percent of
damaged homes from the 2005 hurricanes were uninsured or
underinsured. Of the 60,196 owner-occupied homes with severe
wind damage from these hurricanes, 23,000 did not have
insurance against wind loss.\10\ We recently undertook an
analysis of all new flood insurance policies issued by the NFIP
during the period January 1, 2001 to December 31, 2009 and
found that the median length of time before these new policies
lapsed is 3 to 4 years. On average, only 74 percent of new
policies were still in force 1 year after they were purchased;
after 5 years, only 36 percent were still in place. The lapse
rate is still high after correcting for migration and does not
vary much across flood zones.\11\
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\10\ U.S. Government Accountability Office (GAO) (2007), Natural
Disasters: Public Policy Options for Changing the Federal Role in
Natural Catastrophe Insurance, Washington, DC: GAO, November. GAO-08-7.
\11\ E. Michel-Kerjan, S. Lemoyne and H. Kunreuther (in press).
Policy Tenure under the National Flood Insurance Program. Risk
Analysis: An International Journal.
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Multi-year Loans for Mitigation.--To encourage adoption of loss
reduction measures, State, Federal Government, or commercial
banks could issue property improvement loans so as to spread
the costs over time. For instance, a property owner may be
reluctant to incur an upfront cost of $1,500 for making his
home more disaster resistant but would be willing to pay the
$145 annual cost of a 20-year loan (calculated here at a high
10 percent annual interest rate). In many cases the reduction
in the insurance premium due to lower losses from disasters
will be greater than the loan cost making this investment
financially attractive.
Well-enforced Building Codes.--Given the reluctance of property
owners to invest in mitigation measures voluntarily, building
codes should be designed to reduce future disaster losses and
be well-enforced through third-party inspections or audits.
LESSONS FROM AN ENERGY EFFICIENCY PROGRAM
As we think about developing incentives for disaster reduction, the
Property Assessed Clean Energy (PACE) program that has been adopted by
27 States for promoting energy efficiency has features that can provide
insights into designing the above program.
PACE provides long-term funding from private capital markets at low
cost and needs no Government subsidies or taxes. It raises property
values by making heating and cooling less expensive, and it enjoys
broad bipartisan support nationwide at State and local levels. Here are
the features of the program that encourage property owners to take
measures today to make their home more energy efficient in ways that
mirrors how property owners would want to make their homes more
disaster resistant:
Multi-year Financing.--Interested property owners opt-in to
receive financing for improvements that is repaid through an
assessment on their property taxes for up to 20 years. PACE
financing spreads the cost of energy improvements such as
weather sealing, insulation, energy efficient boilers and
cooling systems, new windows, and solar installations over the
expected life of these measures and allows for the repayment
obligation to transfer automatically to the next property owner
if the property is sold. PACE solves two key barriers to
increased adoption of energy efficiency and small-scale
renewable energy: high upfront costs and fear that project
costs won't be recovered prior to a future sale of the
property.
Annual Savings.--Because basic energy efficiency measures can cut
energy costs by up to 35 percent, annual energy savings will
typically exceed the cost of PACE assessments. The upfront cost
barrier actually turns into improved cash flow for owners in
much the same way that the reduction of annual insurance
premiums could exceed the annual loan costs.
Transfer to new Property Owner.--Like all property-based
assessments, PACE assessments stay with a property upon sale,
until they are fully repaid by future owners who continue to
benefit from the improvement measures.
WE NEED TO ACT NOW
Our country has entered a new era of catastrophes.\12\ Our exposure
is growing and the damage from disasters over the next few years is
likely to be more devastating than what we have experienced during this
past decade. When the next catastrophe occurs, the Federal Government
will very likely come to the rescue, again. If the public sector's
response to recent disasters is an indicator of their future behavior,
new records will be set with respect to Federal assistance.
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\12\ The White House (2007). Economic Report of the President.
Washington, DC.
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In order to avoid this outcome we recommend that the appropriate
government bodies undertake an economic analysis of the benefits and
costs of the proposed multi-year insurance-risk reduction loan program
in relation to the current system of private and public insurance and
Federal disaster assistance.
We have recently proposed a program along the above lines in the
context of the reform of the NFIP which is set to expire by September
30, 2011.\13\
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\13\ E. Michel-Kerjan and H. Kunreuther (2011). Reforming Flood
Insurance. Science 333, 408-409, July 22.
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We applaud the U.S. Senate for conducting this hearing on long-term
exposure of the Federal Government to weather-related risks. We look
forward to continuing to work with key stakeholders on these critical
issues.
______
Risk Management Solutions (RMS)
CATASTROPHE MODELING AND THE EXCEEDANCE PROBABILITY CURVE \1\
A catastrophe model is employed to assess catastrophe risk (e.g.,
the risk to property from natural hazards, such as earthquakes, floods,
hurricanes, and tornado outbreaks) and make corresponding risk
management decisions. The model output on quantified losses is
presented in a way that is useful to a particular stakeholder (where
stakeholders include property owners, insurers, reinsurers, capital
markets, government officials). Once these metrics are in hand,
appropriate risk management strategies (e.g. mitigation, the use of
risk transfer instruments, the accumulation of reserves) can be
assessed.
Currently insurers and reinsurers are the stakeholders with the
most widespread and integrated use of catastrophe models. The capital
markets have also been eager adopters of this technology to accurately
price catastrophe bonds. Property owners are less likely to use
catastrophe models themselves, but their decision processes are
directly or indirectly influenced by the outcomes. At the governmental
level, catastrophe modeling can present the means whereby regulators,
emergency management agencies, and those in charge of government
catastrophe budgets, can gain an appropriate perspective on risk.
USEFULNESS OF THE EP CURVE
The main output from a catastrophe model is the exceedance
probability (EP) curve, plotting loss against annual probability. An
annual probability of 0.1 reflects an event that is expected to happen
on average once every 10 years. The EP curve is a graphical
representation of the probability that a certain level of loss will be
surpassed in a given time period. The loss could be that experience by
a specific insurance portfolio, or the whole of a nation's economy. The
EP curve is strongly skewed--with a long tail extending out to the
right displaying the potential for very large losses but at very low
probabilities. Figure 1 depicts an EP curve for an insurer with a
portfolio of residential earthquake policies in Long Beach, California.
Figure 1. An exceedance probability curve for a portfolio of
residential risks in Long Beach, California.
An EP curve is particularly valuable for insurers and reinsurers to
determine the size and distribution of their potential losses. They
will use the EP curve to determine how to develop their portfolio of
insured properties, so as to keep the probability of insolvency at an
acceptable level. They will also use their loss EP curve to determine
what proportion of their risk needs to be transferred to either a
reinsurer and/or the capital markets.
However, a loss EP curve could also be employed by a government
agency to determine an appropriate perspective on its expected
liabilities in the face of a range of potential catastrophe events. The
curve can provide planners with the average annualized loss--the amount
that would need to be set aside each year to pay for the losses that
would accumulate over time. At the same time a government also needs to
be aware of what it can infrequently be expected to have to pay out--
recognizing that, for example, payments with a 1 percent annual
probability (sometimes termed the ``one in one hundred year loss'') may
be many times the payment at a 10 percent annual probability (i.e. the
``one in 10 year'' payment). For insurers, as for governments, it is
tempting to believe that a few years of low level losses, implies that
losses will remain low, but the EP curve of expected catastrophe losses
illustrates the potential for very large levels at low probabilities,
and governments should be planning for the contingency of having to
handle very significant catastrophe loss events.
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\1\ Main excerpts from Chapter 2 of Catastrophe Modeling: A New
Approach to Managing Risk (Grossi and Kunreuther, eds., 2005).
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The loss EP curve relevant for a particular problem has to be
generated through the application of a catastrophe loss model. These
models apply a particular hazard, such as earthquake, hurricane, or
tornado, to the particular exposures: buildings, infrastructure, goods,
and even people. The models use appropriately tuned vulnerability
functions to reflect the way that loss is generated, e.g. determining
how much damage would occur to a specific building type at a specific
wind speed. For a government concerned with evaluating the EP curve of
potential payments anticipated after catastrophes, the vulnerability
functions need to be tuned and calibrated using the actual experience
of how payments have had to be made after previous catastrophes.
ABOUT RMS
RMS is the world's leading provider of products, services, and
expertise for the quantification and management of catastrophe risk.
More than 400 leading insurers, reinsurers, trading companies, and
other financial institutions rely on RMS models to quantify, manage,
and transfer risk. As an established provider of risk modeling to
companies across all market segments, RMS provides solutions that can
be trusted as reliable benchmarks for strategic pricing, risk
management, and risk transfer decisions.
______
[From Science]
Disaster Management: Redesigning Flood Insurance \1\
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\1\ Improved knowledge from a range of disciplines&ll be needed to
price the much-needed financial products appropriately.
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(By Erwann Michel-Kerjan \2\ and Howard Kunreuther \3\)
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\2\ Author for correspondence. E-mail: [email protected].
\3\ We acknowledge support from the NSF, U.S. Department of
Homeland Security, and the Wharton School's Risk Management and
Decision Processes Center.
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Insurance and government assistance play central roles in ensuring
economic and social resilience in the aftermath ofcatastrophes in
developed countries. Around the globe in the past decade, disasters
have led to unprecedented claims payments to insured victims, and
government relief to aid the uninsured and the affected communities has
risen to historic levels.\4\ \5\ \6\ Increases in population, property
values, and concentration of assets in hazard-prone areas are primary
causes.\5\ Recent climate studies indicate we should also expect more
extreme weather-related events in the future.\7\ \8\ \9\
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\4\ K. Froot, Ed., The Financing of Catastrophe Risk (Chicago Univ.
Press, Chicago, 1999).
\5\ H. Kunreuther, E. Michel-Kerjan, At War with the Weather (MIT
Press, Cambridge, MA, 2009).
\6\ D. Cummins, O. Mahul, Catastrophe Risk Financing in Developing
Countries (World Bank, Washington, DC, 2009).
\7\ D.A. King, Science 303, 176 (2004).
\8\ P.C.D. Milly, et al., Science 319, 573 (2008).
\9\ T. Knutson et al., Nat. Geosci. 3, 157 (2010).
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The cumulative expected exposure of the U.S. government to
catastrophes over the next 75 years could reach $7 trillion.\10\
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\10\ D. Cummins, M. Suher, G. Zanjani, in Measuring and Managing
Federal Financial Risk, D. Lucas, Ed. (National Bureau of Economic
Research, Univ. of Chicago Press, Chicago 2010), pp. 61-96.
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We propose routes to improve flood insurance coverage through the
U.S. National Flood Insurance Program (NFIP), one of the largest
government disaster-insurance programs in the world. The U.S. Congress
is discussing options for continuing the NFIP, which now operates under
a 1-year extension, set to expire on 30 September 2011. The Federal
Emergency Management Agency (FEMA), which is responsible for the NFIP,
is reanalyzing the program. We argue that a new strategy for managing
floods can increase personal responsibility, decrease risk, and lower
government exposure. Improved scientific knowledge from a range of
disciplines will be needed to price the proposed financial products
appropriately. If successful in the United States, the approach could
be explored by other countries.
INSURING FLOOD RISK
Floods are one of the most destructive hazards.\11\ In the United
States, floods account for nearly two-thirds of all presidential
disaster declarations over the period 1953-2010 (see supporting online
material). Hurricanes Katrina, Rita, and Wilma and their resulting
storm surge in 2005 cost over $180 billion (2011 prices).\12\ In the
summer of 2010, one of the worst floodings in Pakistan's history
affected more than 20 million people and inflicted $8 billion to $10
billion in recovery and reconstruction costs.\13\ China also
experienced the worst floods in a decade, which cost $50 billion.\14\
In December 2010, Australia suffered historical flooding.
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\11\ N. Pinter, Science 308, 207 (2005).
\12\ The White House, Economic Report of the President (White
House, Washington, DC, 2007).
\13\ The World Bank, Pakistan Floods 2010: Preliminary Damage and
Needs Assessment (World Bank, Washington, DC, 2010).--
\14\ Guy Carpenter and Co., China Floods Report (Guy Carpenter and
Co., New York, 2010); www.gccapitalideas.com/2010/12/20/
china%E2%80%99s-costly-floods-in-2010-likely-to-have-limited-impact/.
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DEVASTATING LOSSES REQUIRE BETTER INSURANCE
Low-income countries typically rely on government and international
aid to cope with major floods. As countries reach a higher level of
economic development, insurance mechanisms are used more broadly. Flood
insurance can be private, as in Germany and the United Kingdom. In the
United States, residents purchase flood insurance mostly through the
federally run NFIP, established in 1968 as a result of increased
federal relief triggered by disasters in the 1960s and the insurance
industry's refusal to cover this hazard because of their inability to
accurately assess the risk.\15\ The NFIP covers $1.2 trillion of
property today (mainly in coastal states), over three times what was
covered 20 years ago.\16\ \17\
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\15\ H. Kunreuther et al., Disaster Insurance Protection: Public
Policy Lessons (Wiley, New York, 1978).
\16\ E. Michel-Kerjan, J. Econ. Perspect. 24, 165 (2010).
\17\ E. Michel-Kerjan, C. Kousky, J. Risk Insur. 77, 369 (2010).
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NFIP premiums are established by the federal government. A
homeowner can purchase building and contents coverage up to $250,000
and $100,000, respectively, but only if the community that he or she
lives in participates in the program. This requires that a flood-risk
map has been completed and that the appropriate public body has adopted
adequate floodplain management regulations. Homeowners in high-risk
areas (defined as ``100-year'' or ``base'' levels, expected to be
flooded at least once every 100 years) are required to purchase
coverage if they hold a federally backed mortgage.
LIMITS OF THE NFIP AS CURRENTLY DESIGNED
The absence of a large reserve has forced the NFIP into debt, as it
has borrowed over $19 billion from the U.S. Treasury to cover losses
caused by the 2005 and 2008 hurricanes and floods.\16\ Subsidized
insurance is part of the problem: Buildings that are near or below base
flood elevation but that were in place before community flood-risk maps
were completed are still charged rates that are considerably below the
actuarial risk. This was done originally to maintain property values.
About one-fourth of insured properties are still subsidized that
way.\18\ \19\ And even properties constructed after flood mapping are
charged premiums based only on an average historical loss year.\20\
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\18\ F. Wetmore et al., An Evaluation of the National Flood
Insurance Program: Final Report (American Institutes for Research,
Washington, DC, 2006).
\19\ Congressional Budget Office (CBO), Value of Properties in the
National Flood Insurance Program (CBO, Washington, DC, 2007).
\20\ Government Accountability Office (GAO), Flood Insurance:
Public Policy Goals Provide a Framework for Reform (GAO-11-670T, GAO,
Washington, DC, 2011).
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The NFIP has not been able to enroll and retain many homeowners
exposed to flood risk. Recent studies show that insurance penetration
in flood-prone areas remains only at about 50 percent.\21\ \22\ This
lack of coverage is likely to increase the need for disaster relief
after major floods. This situation is not specific to the United
States. In Germany, flood insurance penetration is only 10 percent for
single-family homes.\23\ After the major 2002 Elbe floods, the German
government provided the largest amount of public funds ever paid in the
country's history to compensate uninsured flood victims. In China, only
1 percent to 2 percent of the $50 billion losses of last year's floods
were insured.\14\
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\21\ W. Kriesel, C. Landry, J. Risk Insur. 71, 405 (2004).
\22\ L. Dixon, N. Clancy, S. A. Seabury, A. Overton, The National
Flood Insurance Program's Market Penetration Rate: Estimates and Policy
Implications (RAND Corp., Santa Monica, CA, 2006).
\23\ A. H. Thieken et al., Risk Anal. 26, 383 (2006).
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Do a large proportion of homeowners never buy coverage, or do many
who once purchased insurance let their policies lapse? To answer this
question, we analyzed all new policies issued by the NFIP over the
period 1 January 2001 to 31 December 2009 (n= 8.9 million).\24\ The
median length of time before these new policies lapsed is 3 to 4 years.
On average, only 74 percent of new policies were still in force 1 year
after they were purchased; after 5 years, only 36 percent were still in
place. The lapse rate is high even after correcting for migration and
does not vary much across flood zones.\25\
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\24\ E. Michel-Kerjan, S. Lemoyne de Forges, H. Kunreuther, Risk
Anal. (doi 10.1111/j539-6924.2011.01671.x; http://
opim.wharton.upenn.edu/risk/library/2011-06.pdf.
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Behavioral research can shed light on the underinsurance problem.
As the probability of flood in a given year is low, individuals often
treat these potential disasters as below their threshold level of
concern. Studies on risk perception show that individuals do not
understand low probabilities well and often simply ignore likelihood
information when making decisions.\25\ \26\ The language used to
communicate risks is also a problem. Scientists often talk about a
``100-year return flood,'' but many individuals do not understand what
that means. Some who have suffered a flood believe that they will not
have another flood for 100 years. Homeowners are often myopic: If they
paid insurance premiums for a few years but have not collected on their
policy, they often view insurance as a bad investment and cancel their
policy.\15\ Finally, there might be rational reasons for not purchasing
coverage when this expense competes with other needs that have to be
satisfied with a limited budget.
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\25\ C. Sunstein, Yale Law J. 112, 61 (2002).
\26\ H. Kunreuther, R. Meyer, E. Michel-Kerjan, in The Behavioral
Foundations of Policy, E. Shaffir, Ed. (Princeton Univ. Press,
Princeton, NJ, in press); http://opim.wharton.upenn.edu/risk/library/
2009-08.pdf.
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BETTER TOOLS FOR DISASTER FINANCING
Our proposal for redesigning flood insurance has five prongs, to be
implemented simultaneously because they complement each other. First,
to account for myopic behavior, we recommend that flood insurance be
sold not as 1-year contracts but as multiyear contracts (e.g., 5 or 10
years) that would be attached directly to the property at risk rather
than to the homeowner (as is currently done). We propose that this be
made mandatory for all homeowners in high-risk areas. To ensure that
the requirement is enforced, FEMA could be empowered by Congress to
monitor both existing and new construction in those areas. This reform
will generate several benefits. It would avoid cancellation of
insurance after just a few years. If a homeowner were to move to
another location, the contract would be transferred to the new owner.
As a result, many more properties will be covered and remain so over
time. This should also increase the diversification of the NFIP's
portfolio.
Second, premiums must be risk-based for all, so that homeowners
will be informed of the true exposure of their residence to potential
flood damage.
Third, such insurance contracts could be complemented with
multiyear home-improvement loans provided by the government or
commercial banks to encourage investment in cost-effective risk-
reduction measures, such as flood-proofing one's house; the reduction
in insurance premiums could offset the annual cost of the loan. The
benefits of mitigation may also become more apparent over a 5- or 10-
year period.
Fourth, we recommend a new flood insurance voucher program to
address issues of equity and affordability to complement the strategy
of risk-based premiums for all. Property owners currently residing in a
high-risk zone who require special treatment would receive a voucher by
the NFIP as part of its budget or through special appropriations. This
program would be similar to the Supplemental Nutrition Assistance
Program (``food stamps'') and the Low Income Home Energy Assistance
Program, which in the United States assist millions of low-income
households meet food and energy needs every year.
This proposal will require that building vulnerability be updated
at policy renewal (every 5 or 10 years) and be reflected in the new
premiums. Reevaluation of the flood hazard across the country will be
needed over time to reflect hydrological changes due to factors such as
additional runoffs caused by new construction, loss of wetlands, and
possible effects of a changing climate.\27\
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\27\ R. J. Burby, Global Environ. Change B Environ. Hazards 3, 111
(2001).
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Fifth, given the current level of U.S. public debt and the desire
to lower taxpayers' financial liability, we propose that the NFIP
reduce its catastrophe exposure by purchasing private reinsurance and
catastrophe bonds.\16\ \28\ We recommend a four-layer approach. After
the NFIP determines how much risk to retain, private reinsurers would
provide coverage for a second layer of losses. Investors would then
provide capital through catastrophe bonds to cover a third layer of
losses. For truly exceptional events, the NFIP would utilize its
borrowing capacity from the U.S. Treasury (fourth layer). Determination
of these layers will be based on their price and how much exposure the
program opts to retain or transfer.
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\28\ Reinsurance is coverage purchased by one insurer from another.
Catastrophe bonds would transfer part of the NFIP exposure directly to
institutional investors. If no catastrophe occurs (as defined in the
contract), investors would receive their capital back plus a return on
their investment and a premium from NFIP. If a predefined catastrophe
occurs, the NFIP would use investor payments to cover a portion of the
claims. As of December 2010, there were about $13 billion invested in
such bonds to cover losses from future disasters in the Americas, Asia,
and Europe.
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Transparent measurement of risk exposure is critical. Sophisticated
catastrophe-modeling techniques must be used to determine average
annual loss, standard deviation, probable maximum loss, and other
features that enter into the pricing of disaster risk-financing
instruments. Catastrophe models developed by the scientific community
can be used to update U.S. flood maps, as about half of the NFIP's
roughly 106,000 maps were more than 15 years old in April 2008.\29\
Some steps have already been taken to address this problem. FEMA has
begun to digitize flood maps using geographic information systems so
that they are easier to update. After the failure of the New Orleans'
levee system in 2005, the U.S. Army Corps of Engineers began
reevaluating levees throughout the United States using data from
hydrology, climatology, soil science, and engineering. These studies
have helped determine which levees no longer meet the standards for
which they had been designed. These developments in assessing risk more
accurately could be useful in determining costs and benefits of the
proposed redesign of flood insurance.
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\29\ R. King, Mandatory Flood Insurance Purchase in Remapped
Residual Risk Areas Behind Levees (Report 7-5700, Congressional
Research Service, Washington, DC, 2010).
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______
For additional reading, please see: http://www.sciencemag.org/
content/327/5964/454.abstract.
______
Letter From the Center for American Progress Action Fund
August 4, 2011.
Hon. Richard J. Durbin,
Chair, Subcommittee on Financial Services and General Government,
Washington, DC.
Dear Chairman Durbin: We would like to submit the attached Center
for American Progress report, ``The Year of Living Dangerously: 2010
Extreme Weather Cost Lives, Health, Economy'' for the record of the
July 28, 2011 hearing on ``Federal Disaster Assistance Budgeting.'' \1\
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\1\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year
of living dangerously'' (Washington: Center for American Progress,
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
---------------------------------------------------------------------------
This analysis by the Center for American Progress documents the
human and economic impact of the extreme weather events in the United
States in 2010. Last year, unprecedented extreme weather led to a
record number of disaster declarations by the Federal Emergency
Management Agency. The United States and the world were swept by
flooding, severe winter storms, heat waves, droughts, hurricanes, and
heavy rain storms. These are the types of events that scientists
predict will occur with more frequency and/or severity as the planet
warms due to unchecked emissions of carbon dioxide and other climate
pollutants.
The extreme weather of 2010 exacted a huge human and economic toll
as well. The CAP analysis found that more than 380 people died and
1,700 were injured due to weather events in the United States
throughout the year. And the magnitude of these events forced the
Federal Emergency Management Agency,\2\ or FEMA, to declare 81
disasters last year. For nearly 60 years, the annual average has been
33.\3\ In 2010, total damages exceeded a whopping $6.7 billion. As of
April 2011, FEMA had dedicated more than $2.2 billion in financial
assistance to those harmed by extreme weather in 2010.
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\2\ ``Federal Emergency Management Agency'', available at http://
www.fema.gov/.
\3\ ``FEMA: Declared disasters by year or state'' available at
http://www.fema.gov/news/disaster_totals_annual.fema.
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It is difficult, of course, to link or ``attribute'' individual
extreme weather events in a single year to global warming. Climate
factors-including human influences-shape weather patterns.
According to Munich Re, one of the world's largest reinsurers,
``the only plausible explanation for the rise in weather-related
catastrophes is climate change.'' \4\
---------------------------------------------------------------------------
\4\ Munich RE, ``Two months to Cancun climate summit/large number
of weather extremes as strong indication of climate change'', Press
release September 27, 2010, available at http://www.munichre.com/en/
media_relations/press_releases/2010/2010_09_27_press_release. aspx.
---------------------------------------------------------------------------
Kevin Trenberth, Sc.D., head of the Climate Analysis Section at the
National Center for Atmospheric Research,\5\ explained at the American
Meteorological Society's January 2011 meeting, ``Given that global
warming is unequivocal, the null hypothesis should be that all weather
events are affected by global warming rather than the inane statements
along the lines of `of course we cannot attribute any particular
weather event to global warming.'' \6\
---------------------------------------------------------------------------
\5\ ``National Center for Atmospheric Research'' available at
http://ncar.ucar.edu/about-ncar.
\6\ ``Promoting climate information and communication of climate
change'' available at http://ams.confex.com/ams/91Annual/webprogram/
Paper180230.html.
---------------------------------------------------------------------------
In other words, says Trenberth, ``it's not the right question to
ask if this storm or that storm is due to global warming, or is it
natural variability. Nowadays, there's always an element of both.'' \7\
---------------------------------------------------------------------------
\7\ Justin Gillis, ``In weather chaos, a case for global warming'',
The New York Times, August 14, 2010, available at http://
www.nytimes.com/2010/08/15/science/earth/15climate.html?
pagewanted=print.
---------------------------------------------------------------------------
Atmospheric concentrations of carbon dioxide and other greenhouse
gas pollutants are turning up the heat on our planet. Scientists agree
that the string of disastrous weather extremes this past year are the
types of severe weather that will become more frequent or ferocious as
the planet continues to warm. For instance, in the ``first major paper
of its kind'' tracking global climatic trends from 1951 to 1999,
Scottish and Canadian researchers used sophisticated computer models to
confirm a human contribution to more intense precipitation extremes
with very high confidence.\8\
---------------------------------------------------------------------------
\8\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year
of living dangerously'' (Washington: Center for American Progress,
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
---------------------------------------------------------------------------
This analysis is supported by a 2010 Duke University-led study \9\
that found, ``Global warming is driving increased frequency of extreme
wet or dry summer weather in southeast, so droughts and deluges are
likely to get worse.'' \10\
---------------------------------------------------------------------------
\9\ Ibid.
\10\ Ibid.
---------------------------------------------------------------------------
A study published in the 2011 Journal of Climate presents
``evidence of a significant human influence on the increasing severity
of extremely warm nights and decreasing severity of extremely cold days
and nights.'' \11\
---------------------------------------------------------------------------
\11\ Christidis, Nikolaos, Peter A. Stott, Simon J. Brown, 2011:
The Role of Human Activity in the Recent Warming of Extremely Warm
Daytime Temperatures. J. Climate, 24, 1922-1930.
---------------------------------------------------------------------------
Likewise, a report by the National Center for Atmospheric
Research,\12\ Climate Central, The Weather Channel, and the National
Oceanic and Atmospheric Administration shows that ``if temperatures
were not warming, the number of record daily highs and lows being set
each year would be approximately even. Instead . . . record high
temperatures far outpace record lows across the U.S.''
---------------------------------------------------------------------------
\12\ ``Record high temperatures far outpace record lows across
U.S.'', available at http://www2.ucar.edu/news/1036/record-high-
temperatures-far-outpace-record-lows-across-us.
---------------------------------------------------------------------------
The recent extreme weather should not be a surprise. In 1999,
Trenberth projected that global warming would lead to severe
precipitation.
``An increase in heavy precipitation events should be a primary
manifestation of the climate change that accompanies increases in
greenhouse gases in the atmosphere.''
Nine years later, the U.S. Climate Change Program under President
George W. Bush came to a very similar conclusion. ``Heavy downpours
have become more frequent and intense. Droughts are becoming more
severe in some regions.'' \13\ These are some of the extreme weather
events we experienced this April, and in 2010.
---------------------------------------------------------------------------
\13\ US Climate Change Science Program, ``Weather and Climate
Extremes in a Changing Climate'' (2008).
---------------------------------------------------------------------------
Because we have not brought carbon pollution under control, the
weather events of 2010 will continue to revisit us--with a vengeance as
they have in 2011. We must act quickly and unequivocally to address
climate change before the threat becomes insurmountable. This includes
recognizing that global warming is already affecting us both
domestically and internationally. There are indications that human and
economic losses from extreme weather will continue to grow as the
oceans and planet warms.
In April 2011, for instance, the United States was struck by
various extreme weather events. The Weather Channel observed that:
``It's been a truly awful, record-setting, tornadic April. We've
had 11 major severe weather events, some lasting multiple days.'' \14\
---------------------------------------------------------------------------
\14\ ``The Weather Channel'' available at http://www.weather.com/
outlook/weather-news/news/articles/april-severe-scorecard_2011-04-18.
These April 2011 extreme events included ``supercell
thunderstorms'' \15\ in Iowa, severe drought and record wildfires in
Texas,\16\ and heavy rains \17\ across the United States. The April
southeastern storms and tornados took at least 297 lives across eight
States.\18\ And heavy rains in the Mississippi River Valley during
April and May caused some of the most severe, damaging floods there
this century.\19\
---------------------------------------------------------------------------
\15\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year
of living dangerously'' (Washington: Center for American Progress,
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
\16\ ``Record April: Severe weather scorecard'' available at http:/
/www.weather.com/outlook/weather-news/news/articles/a pril-severe-
scorecard_2011-04-18?page=11.
\17\ Daniel J. Weiss, Valeri Vasquez, and Ben Kaldunski, ``The year
of living dangerously'' (Washington: Center for American Progress,
2010), available at http://www.americanprogress.org/ issues/2011/04/
extreme_weather.html.
\18\ Ibid.
\19\ Louis BURDEAU, ``Mississippi River Floods 2011: Deep South
Braces For Surge Of Water Not Seen Since 1927'', The Huff Post Green,
April 28, 2011, available at http://www.huffingtonpost.com/2011/04/28/
mississippi-river-flood-2011_n_855242.html.
---------------------------------------------------------------------------
Many States continue to be plagued by extreme weather, including
droughts in Texas and Oklahoma, record heat waves in the Midwest, mid-
Atlantic and the northeast, and the hottest July on record.
The July 27 hearing was very timely. We share your concern that:
``We are not prepared. Our weather events are getting worse,
catastrophic in fact . . . The Federal government is ignoring the
obvious. We need to do more to protect Federal assets and respond to
growing demands for disaster assistance on an increasing frequency.''
\20\
---------------------------------------------------------------------------
\20\ ``Durbin: Federal Government Unprepared for growing number of
extreme weather events'', available at http://durbin.senate.gov/public/
index.cfm/pressreleases?ID=fd009756-5e33-48d7-be3e-9ee0160f1789.
We agree with you that the Federal Government must better prepare
to provide damaged communities with the resources they need to recover
after extreme weather events.
The old saying that ``an ounce of prevention is worth a pound of
cure'' certainly applies to extreme weather. The cure--ensuring that
future budgets include adequate funds to help communities, businesses
and families recover--is necessary but not sufficient. It will require
budgeting billions of dollars annually to assist areas assaulted by
extreme weather events. This will be a challenge at a time when some in
the Congress seek deep and lasting reductions in discretionary
spending.
In addition, we must also attempt to prevent the rise in extreme
weather events and the associated loss of life, injuries, and damages.
The most cost effective step would be the reduction of the carbon
dioxide pollution responsible for climate change and linked to the
growth in deadly and expensive extreme weather events.
Thank you for your leadership in this area, and the opportunity to
submit these remarks and the Center for American Progress' report,
``The Year of Living Dangerously,'' for the record of this hearing.
Sincerely,
Daniel J. Weiss,
Senior Fellow and Director
of Climate Strategy.
Valeri Vasquez,
Special Assistant, Energy
Program.
______
For further information, please see: http://
www.americanprogress.org/issues/2011/04/extreme_weather.html
STATEMENT OF SENATOR JERRY MORAN
Senator Moran. Mr. Chairman, this hearing today will
examine the role of the Federal Government in addressing the
economic impact of severe weather events through long-term
budgetary planning, something that this Congress ought to spend
more time on, the budget as well as budgetary planning.
Numerous agencies have significant roles to play in regards
to responding to natural disasters. As a member of the Senate
Small Business Committee, as well as the ranking member of this
subcommittee, I'm very familiar with the assistance that the
Small Business Administration (SBA) provides in regard to the
disaster loan programs to businesses and families impacted by
disasters. I've experienced that and their services in my own
home State on many occasions.
Given our Federal Government's fiscal constraints, I
believe we must carefully review all Federal funding to ensure
that we are budgeting for critical needs appropriately.
Reviewing how the Government plans for disasters is an
important part of that process and can help ensure that we
assist families and businesses in need in a fiscally
responsible way.
This critical issue is one that I look forward to hearing
witnesses' testimony concerning, and I want to make certain
that we have the ability to pursue the opportunity to improve
our Government's ability to respond to these matters, and I
look forward to hearing from the witnesses.
Senator Durbin [presiding]. Thank you, Senator Moran. We
will start with each witness. You each have 5 minutes. Your
written testimony will be part of the permanent and total
record of the hearing. And then Senator Moran and others who
might show up will ask a few questions. Mr. Trimble, please
lead off.
STATEMENT OF DAVID C. TRIMBLE, DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Trimble. Chairman Durbin, Ranking Member Moran, I'm
pleased to be here today to discuss the extent to which Federal
long-term budget planning contemplates changes in the frequency
and severity of weather events that may occur as a result of
changes in the climate.
Recent assessments of the potential impacts of climate
change in the United States have found, among other things,
that many types of extreme weather events, such as heat waves
and regional droughts, have become more frequent and intense
during the past 40 to 50 years.
Further increases in the frequency and severity of such
damaging weather events are projected to affect water
resources, agriculture, coastal areas, and infrastructure. The
Department of Defense recently noted that climate change may
also act as an accelerant of instability or conflict around the
world.
Policymakers are increasingly viewing adaptation, defined
as adjustments to natural and human systems in response to
actual or expected climate change, as a risk management
strategy to protect vulnerable sectors and communities that
might be affected by changes in the climate. It may be costly
to raise river or coastal dikes to protect communities and
resources from sea level rise, build higher bridges, or improve
stormwater systems, but there's a growing recognition that the
cost of inaction could be greater.
Over the years, the GAO has reported on many climate
change-related issues, including recent reports on adaptation
and Federal funding for climate change programs and activities.
Four key points stand out from these reports.
First, climate change adaptation has begun to receive more
attention and resources because the greenhouse gases (GHG)
already in the atmosphere are expected to continue altering the
climate system into the future, regardless of efforts to
control emissions.
Further, there is a growing recognition that past practices
for making decisions may no longer be reliable. According to
the National Research Council (NRC), many decision rules for
such things as building bridges or establishing zoning rules
assume a continuation of past climate conditions, with similar
patterns of variation and the same probabilities of extreme
events.
According to the NRC, that assumption, fundamental to the
way people and organizations make their choices, is no longer
valid. A 2007 GAO report on Federal insurance programs
highlights this point. We found, at that time, unlike the
private sector, neither the National Flood Insurance Program
(NFIP) nor the Federal Crop Insurance Corporation had analyzed
the potential impacts of an increase in the frequency or
severity of weather events.
Second, Federal, State, and local authorities on the front
line of early adaptation efforts face numerous challenges,
including insufficient site-specific data such as local
projections of expected climate changes. The lack of such data
makes it hard for these officials to understand or quantify the
potential impacts of climate change, and difficult to justify
the cost of adaptation efforts, since projections of future
benefits are less certain than current costs.
Third, to be effective, Federal efforts to address these
challenges must be coordinated and directed toward a common
goal. In 2009, we recommended the development of a national
strategic plan for adaptation. The recent Interagency Climate
Change Adaptation Task Force is a positive step and responsive
to our recommendation, but much work remains.
Fourth and finally, adaptation will require making policy
and management decisions that cut across traditional sectors,
issues, and jurisdictional boundaries. Many Federal entities,
executive offices, and organizations manage programs and
activities related to climate change. However, getting these
entities to work toward a common goal is complicated.
PREPARED STATEMENT
According to our May 2011 report, Federal funding for
climate change programs and activities totaled nearly $9
billion in 2010, with another $7 billion in related tax
expenditures. This report found that agencies did not
consistently interpret methods for defining and reporting the
funding of climate change activities and that there is no
consolidated set of strategic priorities that integrates
climate change programs and activities across the Federal
Government. As more Federal, State, and local agencies focus
attention on incorporating climate change into their planning
and decisionmaking, the challenges facing these decisionmakers
will become increasingly prominent.
Improved accounting over the billions currently spent on
climate change-related activities, establishing clear strategic
priorities, and aligning funding with priorities will help the
Congress address these challenges, and hopefully minimize the
economic toll of future severe weather events. That concludes
my statement. I'll, of course, be happy to answer any
questions.
[The statement follows:]
Prepared Statement of David C. Trimble
CLIMATE CHANGE ADAPTATION
Aligning Funding With Strategic Priorities
Chairman Durbin, Ranking Member Moran, and members of the
subcommittee: I am pleased to be here today to discuss the extent to
which Federal long-term budget planning contemplates changes in the
frequency and severity of weather events that may occur as a result of
changes in the climate. A 2009 assessment by the United States Global
Change Research Program (USGCRP) found that many types of extreme
weather events, such as heat waves and regional droughts, have become
more frequent and intense during the past 40 to 50 years and that
changes in these kinds of extreme weather and climate events are among
the most serious challenges to our Nation in coping with a changing
climate.\1\ According to the assessment, changes in extreme weather and
climate events will affect human health, water supply, agriculture,
coastal areas, and many other aspects of society and the natural
environment.
---------------------------------------------------------------------------
\1\ USGCRP coordinates and integrates Federal research on changes
in the global environment--including climate change--and their
implications for society. According to a simplified National
Aeronautics and Space Administration description, ``Weather is what
conditions of the atmosphere are over a short period of time, and
climate is how the atmosphere `behaves' over relatively long periods of
time. When we talk about climate change, we talk about changes in long-
term averages of daily weather.''
---------------------------------------------------------------------------
Federal, State, and local agencies are tasked with a wide array of
responsibilities, such as managing natural resources, that will be
affected by a changing climate. Climate change also has implications
for the fiscal health of the Federal Government, affecting Federal crop
and flood insurance programs, and placing new stresses on
infrastructure. Further, in February 2010 the Department of Defense
(DOD) issued its Quadrennial Defense Review report.\2\ That report
noted that:
---------------------------------------------------------------------------
\2\ According to the DOD, the Quadrennial Defense Review (QDR) is
to set a long-term course for DOD as it assesses the threats and
challenges that the Nation faces and re-balances DOD's strategies,
capabilities, and forces to address today's conflicts and tomorrow's
threats. As required by law, the most recent QDR examined the
capabilities of the armed forces to respond to the consequences of
climate change, in particular, preparedness for natural disasters from
extreme weather events and other missions the armed forces may be asked
to support inside the United States and overseas.
``. . . while climate change alone does not cause conflict, it may
act as an accelerant of instability or conflict, placing a burden to
respond on civilian institutions and militaries around the world. In
addition, extreme weather events may lead to increased demands for
defense support to civil authorities for humanitarian assistance or
---------------------------------------------------------------------------
disaster response both within the United States and overseas.''
In recent years, climate change adaptation--defined as adjustments
to natural or human systems in response to actual or expected climate
change--has begun to receive more attention because the greenhouse
gases already in the atmosphere are expected to continue altering the
climate system into the future, regardless of efforts to control
emissions. According to the National Research Council, however,
individuals and institutions whose futures will be affected by climate
change are unprepared both conceptually and practically for meeting the
challenges and opportunities it presents. In this context, adapting to
climate change requires making policy and management decisions that cut
across traditional economic sectors, jurisdictional boundaries, and
levels of government. We have previously reported that when agencies do
not collaborate well when addressing a complicated, interdisciplinary
issue like climate change, they may carry out programs in a fragmented,
uncoordinated way, resulting in a patchwork of programs that can limit
the overall effectiveness of the Federal effort.\3\
---------------------------------------------------------------------------
\3\ GAO, Results-Oriented Government: Practices That Can Help
Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15
(Washington, D.C.: October 21, 2005), and Managing for Results:
Barriers to Interagency Coordination, GAO/GGD-00-106 (Washington, D.C.:
March 29, 2000).
---------------------------------------------------------------------------
My testimony today addresses:
--the actions Federal, State, and local authorities are taking to
adapt to climate change;
--the challenges that Federal, State, and local officials face in
their efforts to adapt and actions Federal agencies could take
to help address these challenges; and
--the extent to which Federal funding for adaptation and other
climate change activities is consistently tracked and reported
and aligned with strategic priorities.
The information in this testimony is based on prior work, largely
on our recent reports on climate change adaptation and Federal climate
change funding.\4\ Additional information on our scope and methodology
is available in each issued product. All of the work on which this
statement is based was performed in accordance with generally accepted
government auditing standards.
---------------------------------------------------------------------------
\4\ GAO, Climate Change Adaptation: Strategic Federal Planning
Could Help Government Officials Make More Informed Decisions, GAO-10-
113, (Washington, D.C.: October 7, 2009), and Climate Change:
Improvements Needed to Clarify National Priorities and Better Align
Them with Federal Funding Decisions, GAO-11-317, (Washington, D.C.: May
20, 2011).
---------------------------------------------------------------------------
FEDERAL, STATE, AND LOCAL AUTHORITIES ARE BEGINNING TO TAKE STEPS TO
ADAPT TO CLIMATE CHANGE
Our October 2009 report on climate change adaptation found no
coordinated national approach to adaptation, but our May 2011 report on
climate change funding cited indications that Federal agencies were
beginning to respond to climate change more systematically.\5\ About
the same time as the issuance of our October 2009 report, Executive
Order 13514 on Federal Leadership in Environmental, Energy, and
Economic Performance called for Federal agencies to participate
actively in the Interagency Climate Change Adaptation Task Force.\6\
The task force, which began meeting in spring 2009, is co-chaired by
the Council on Environmental Quality (CEQ), the National Oceanic and
Atmospheric Administration (NOAA), and the Office of Science and
Technology Policy (OSTP), and includes representatives from more than
20 Federal agencies and executive branch offices. The task force was
formed to develop Federal recommendations for adapting to climate
change impacts both domestically and internationally and to recommend
key components to include in a national strategy.
---------------------------------------------------------------------------
\5\ See GAO-10-113 and GAO-1 109317. For a list of Federal
adaptation efforts by agency as of 2009, see Climate Change Adaptation:
Information on Selected Federal Efforts to Adapt To a Changing Climate
(GAO-10-11 4SP, October 7, 2009), an E-supplement to GAO-10-113, GAO-
10-114SP, (Washington, D.C.: October 2009).
\6\ For more information about the Interagency Climate Change
Adaptation Task Force, see http://www.whitehouse.gov/administration/
eop/ceq/initiatives/adaptation.
---------------------------------------------------------------------------
On October 14, 2010, the task force released its interagency report
outlining recommendations to the President for how Federal policies and
programs can better prepare the United States to respond to the impacts
of climate change. The report recommends that the Federal Government
implement actions to expand and strengthen the Nation's capacity to
better understand, prepare for, and respond to climate change. These
recommended actions include making adaptation a standard part of agency
planning to ensure that resources are invested wisely and services and
operations remain effective in a changing climate. According to CEQ
officials, the task force will continue to meet as an interagency forum
for discussing the Federal Government's adaptation approach and to
support and monitor the implementation of recommended actions in the
progress report. The task force is due to release another report in
October 2011 that documents progress toward implementing its
recommendations and provides additional recommendations for refining
the Federal approach to adaptation, as appropriate, according to CEQ
officials.\7\
---------------------------------------------------------------------------
\7\ The White House Council on Environmental Quality, Progress
Report of the Interagency Climate Change Adaptation Task Force:
Recommended Actions in Support of a National Climate Change Adaptation
Strategy (October 5, 2010). This report is available at http://
www.whitehouse.gov/sites/default/files/microsites/ceq/Interagency-
Climate-ChangeAdaptation-Progress-Report.pdf.
---------------------------------------------------------------------------
Individual agencies are also beginning to consider adaptation
actions. For example, in May 2009, the Chief of Naval Operations
created Task Force Climate Change to address the naval implications of
a changing Arctic and global environment. The Task Force was created to
make recommendations to Navy leadership regarding policy, investment,
and action, and to lead public discussion. In addition, the Department
of the Interior issued an order in September 2009 designed to address
the impacts of climate change on the Nation's water, land, and other
natural and cultural resources.\8\ Among other things, the order
requires each bureau and office in the Department to consider and
analyze potential climate change impacts when undertaking long-range
planning exercises, setting priorities for scientific research and
investigations, developing multi-year management plans, and making
major decisions regarding potential use of resources. In another
example, according to the NOAA, its Regional Integrated Sciences and
Assessments (RISA) program supports climate change research to meet the
needs of decisionmakers and policy planners at the national, regional,
and local levels.
---------------------------------------------------------------------------
\8\ Secretarial Order No. 3289 (September 14, 2009), as amended by
Secretarial Order No. 3289, Amendment No. 1 (February 22, 2010). As
originally enacted, the order also designated eight regional Climate
Change Response Centers, which were subsequently renamed Climate
Science Centers. According to the Department of the Interior, these
centers will synthesize existing climate change impact data and
management strategies, help resource managers put them into action on
the ground, and engage the public through education initiatives.
Interior has also identified specific adaptation strategies and tools
for natural resource managers. For example, Interior provided a number
of adaptation-related policy options for land managers in reports
produced for its Climate Change Task Force, a past effort that has
since been expanded upon to reflect new priorities.
---------------------------------------------------------------------------
In October 2009, we reported that some State and local authorities
were beginning to plan for and respond to climate change impacts.\9\ We
visited three U.S. sites in doing the work for that report--New York
City; King County, Washington; and the State of Maryland--where State
and local officials were taking such steps. We have not evaluated the
progress of these initiatives since the issuance our 2009 report.
---------------------------------------------------------------------------
\9\ GAO-10-113.
---------------------------------------------------------------------------
New York City.--New York City's adaptation efforts stemmed from a
growing recognition of the vulnerability of the city's infrastructure
to natural disasters, such as the severe flooding in 2007 that led to
widespread subway closures. At the time of our October 2009 report, New
York City's adaptation efforts typically had been implemented as
facilities were upgraded or as funding became available. For example,
the city's Department of Environmental Protection (DEP), which manages
water and wastewater infrastructure, had begun to address flood risks
to its wastewater treatment facilities. These and other efforts are
described in DEP's 2008 Climate Change Program Assessment and Action
Plan.\10\ Many of New York City's wastewater treatment plants, such as
Tallman Island, are vulnerable to sea level rise and flooding from
storm surges because they are located in the floodplain next to the
bodies of water into which they discharge. In response to this threat,
DEP planned to, in the course of scheduled renovations, raise sensitive
electrical equipment, such as pumps and motors, to higher levels to
protect them from flood damage.
---------------------------------------------------------------------------
\10\ New York City Department of Environmental Protection Climate
Change Program, with contributions by Columbia University's Center for
Climate Systems Research and HydroQual Environmental Engineers &
Scientists, P.C., Report 1: Assessment and Action Plan--A Report Based
on the Ongoing Work of the DEP Climate Change Task Force (New York
City, N.Y., 2008).
---------------------------------------------------------------------------
King County, Washington.--According to officials from the King
County Department of Natural Resources and Parks, the county took steps
to adapt to climate change because its leadership was highly aware of
climate impacts on the county. For example, in November 2006, the
county experienced severe winter storms that caused a series of levees
to crack. The levees had long needed repair, but the storm damage
helped increase support for the establishment of a countywide flood
control zone district, funded by a dedicated property tax.\11\ The
flood control zone district planned to use the funds, in part, to
upgrade flood protection facilities to increase the county's resilience
to future flooding. In addition to more severe winter storms, the
county expected that climate change would lead to sea level rise;
reduced snowpack; and summertime extreme weather such as heat waves and
drought, which can lead to power shortages because hydropower is an
important source of power in the region. The University of Washington
Climate Impacts Group, funded by NOAA's RISA program, has had a long-
standing relationship with county officials and worked closely with
them to provide regionally specific climate change data and modeling,
such as a 2009 assessment of climate impacts in Washington, as well as
decisionmaking tools.\12\
---------------------------------------------------------------------------
\11\ King County Ordinance 15728 (April 25, 2007). The district is
funded by a countywide ad valorem property tax levy of 10 cents per
$1,000 assessed value.
\12\ University of Washington Climate Impacts Group, The Washington
Climate Change Impacts Assessment: Evaluating Washington's Future in a
Changing Climate (Seattle, Wash., 2009).
---------------------------------------------------------------------------
Maryland.--Maryland officials took a number of steps to formalize
their response to climate change effects. An executive order in 2007
established the Maryland Commission on Climate Change, which released
the Maryland Climate Action Plan in 2008.\13\ As part of this effort,
the Maryland Department of Natural Resources (DNR) chaired an
Adaptation and Response Working Group, which issued a report on sea
level rise and coastal storms.\14\ The 2008 Maryland Climate Action
Plan calls for future adaptation strategy development to cover other
sectors, such as agriculture and human health. Additionally, Maryland
provided guidance to coastal counties to assist them with incorporating
the effects of climate change into their planning documents. For
example, DNR funded guidance documents to three coastal counties--
Dorchester, Somerset, and Worcester--on how to address sea level rise
and other coastal hazards in their local ordinances and planning
efforts.\15\
---------------------------------------------------------------------------
\13\ Maryland Commission on Climate Change, Climate Action Plan
(Annapolis, Maryland, 2008).
\14\ Maryland Commission on Climate Change Adaptation and Response
Working Group, Comprehensive Strategy for Reducing Maryland's
Vulnerability to Climate Change Phase I: Sea Level Rise and Coastal
Storms.
\15\ Wanda Diane Cole, Maryland Eastern Shore Resource Conservation
& Development Council, Sea Level Rise: Technical Guidance for
Dorchester County, a special report prepared at the request of the
Maryland Department of Natural Resources, March 2008; URS and RCQuinn
Consulting, Inc., Somerset County Maryland Rising Sea Level Guidance, a
special report prepared at the request of Somerset County, Maryland,
Annapolis, Md., 2008; and CSA International Inc., Sea Level Rise
Response Strategy Worcester County, Maryland, a special report prepared
at the request of Worcester County, Maryland Department of
Comprehensive Planning, September 2008.
---------------------------------------------------------------------------
GOVERNMENT OFFICIALS FACE NUMEROUS CHALLENGES WHEN CONSIDERING
ADAPTATION EFFORTS, AND FURTHER FEDERAL ACTION COULD HELP THEM MAKE
MORE INFORMED DECISIONS
In our prior work, we found that the challenges faced by Federal,
State, and local officials in their efforts to adapt to climate change
fell into several categories:
Focusing on Immediate Needs.--Available attention and resources
were focused on more immediate needs, making it difficult for
adaptation efforts to compete for limited funds. For example,
several Federal, State, and local officials who responded to a
questionnaire we prepared for our October 2009 report on
adaptation noted how difficult it is to convince managers of
the need to plan for long-term adaptation when they are
responsible for more urgent concerns that have short
decisionmaking timeframes. One Federal official explained that
``it all comes down to resource prioritization. Election and
budget cycles complicate long-term planning such as adaptation
will require. Without clear top-down leadership setting this as
a priority, projects with benefits beyond the budget cycle tend
to get raided to pay current-year bills to deliver results in
this political cycle.''
Insufficient Site-specific Data.--Without sufficient site-
specific data, such as local projections of expected changes,
it is hard to predict the impacts of climate change and thus
hard for officials to justify the current costs of adaptation
efforts for potentially less certain future benefits. This is
similar to what we found in past work on climate change on
Federal lands. Specifically, our August 2007 report
demonstrated that land managers did not have sufficient site-
specific information to plan for and manage the effects of
climate change on the Federal resources they oversee.\16\ In
particular, the managers lacked computational models for local
projections of expected changes. For example, at the time of
our review, officials at the Florida Keys National Marine
Sanctuary said that they did not have adequate modeling and
scientific information to enable managers to predict the
effects of climate change on a small scale, such as that
occurring within the sanctuary.\17\ Without such modeling and
information, most of the managers' options for dealing with
climate change were limited to reacting to already-observed
effects on their units, making it difficult to plan for future
changes. Furthermore, these resource managers said that they
generally lacked detailed inventories and monitoring systems to
provide them with an adequate baseline understanding of the
plant and animal species that existed on the resources they
manage. Without such information, it is difficult to determine
whether observed changes are within the normal range of
variability.
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\16\ GAO, Climate Change: Agencies Should Develop Guidance for
Addressing the Effects on Federal Land and Water Resources, GAO-07-863,
(Washington, D.C.: August 7, 2007).
\17\ We conducted our work for GAO-07-863 between May 2006 and July
2007. The agencies involved with this work are now beginning to
consider climate change adaptation in planning decisions.
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Lack of Clear Roles and Responsibilities.--Adaptation efforts are
constrained by a lack of clear roles and responsibilities among
Federal, State, and local agencies. Of particular note, about
70 percent (124 of 178) of the Federal, State, and local
officials who responded to a questionnaire we prepared for our
October 2009 report on adaptation rated the ``lack of clear
roles and responsibilities for addressing adaptation across all
levels of government'' as very or extremely challenging. For
example, according to one respondent, ``there is a power
struggle between agencies and levels of government . . .
Everyone wants to take the lead rather than working together in
a collaborative and cohesive way.''
These challenges make it harder for officials to justify the
current costs of adaptation efforts for potentially less certain future
benefits. A 2009 report by the National Research Council discusses how
officials are struggling to make decisions based on future climate
scenarios instead of past climate conditions.\18\ According to the
report, requested by the Environmental Protection Agency and NOAA,
usual practices and decision rules (for building bridges, implementing
zoning rules, using private motor vehicles, and so on) assume a
stationary climate--a continuation of past climate conditions,
including similar patterns of variation and the same probabilities of
extreme events. According to the National Research Council report, that
assumption, which is fundamental to the ways people and organizations
make their choices, is no longer valid; Climate change will create a
novel and dynamic decision environment.
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\18\ National Research Council (2009), Informing Decision in a
Changing Climate. Panel on Strategies and Methods for Climate-Related
Decision Support, Committee on the Human Dimensions of Global Change,
Division of Behavioral and Social Sciences and Education. Washington,
DC: The National Academies Press.
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We reached similar conclusions in a March 2007 report that
highlighted how historical information may no longer be a reliable
guide for decisionmaking.\19\ We reported on the Federal Emergency
Management Agency's (FEMA) National Flood Insurance Program (NFIP),
which insures properties against flooding, and the U.S. Department of
Agriculture's (USDA) Federal Crop Insurance Corporation, which insures
crops against drought or other weather disasters. Among other things,
the report contrasted the experience of private and public insurers. We
found that many major private insurers were proactively incorporating
some near-term elements of climate change into their risk management
practices. In addition, other private insurers were approaching climate
change at a strategic level by publishing reports outlining the
potential industry-wide impacts and strategies to proactively address
the issue.
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\19\ GAO, Climate Change: Financial Risks to Federal and Private
Insurers in Coming Decades Are Potentially Significant, GAO-07-285,
(Washington, D.C.: March 16, 2007).
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In contrast, we noted that the agencies responsible for the
Nation's two key Federal insurance programs had done little to develop
the kind of information needed to understand their programs' long-term
exposure to climate change for a variety of reasons. As a FEMA official
explained, the NFIP is designed to assess and insure against current--
not future--risks. Unlike the private sector, neither this program nor
the Federal Crop Insurance Corporation had analyzed the potential
impacts of an increase in the frequency or severity of weather-related
events on their operations over the near- or long-term. The proactive
view of private insurers in our 2007 report was echoed on March 17,
2009, by the National Association of Insurance Commissioners, which
adopted a mandatory requirement that insurance companies disclose to
regulators the financial risks they face from climate change, as well
as actions the companies are taking to respond to those risks. We have
not studied the progress of these specific programs in managing the
Nation's long-term exposure to climate change since the issuance of our
2007 report.
Based on information obtained from studies, visits to sites
pursuing adaptation efforts, and responses to a Web-based questionnaire
sent to Federal, State, and local officials knowledgeable about
adaptation, our October 2009 report identified three categories of
potential Federal actions for addressing challenges to adaptation
efforts:
--First, training and education efforts could increase awareness
among Government officials and the public about the impacts of
climate change and available adaptation strategies. A variety
of programs are trying to accomplish this goal, such as the
Chesapeake Bay National Estuarine Research Reserve (partially
funded by NOAA), which provides education and training on
climate change to the public and local officials in Maryland.
--Second, actions to provide and interpret site-specific information
could help officials understand the impacts of climate change
at a scale that would enable them to respond. About 80 percent
of the respondents to our Web-based questionnaire rated the
``development of State and local climate change impact and
vulnerability assessments'' as very or extremely useful.
--Third, the Congress and Federal agencies could encourage adaptation
by clarifying roles and responsibilities. About 71 percent of
the respondents to our Web-based questionnaire rated the
development of a national adaptation strategy as very or
extremely useful. Furthermore, officials we spoke with and
officials who responded to our questionnaire said that a
coordinated Federal response would also demonstrate a Federal
commitment to adaptation. Importantly, our October 2009 report
recommended that within the Executive Office of the President
(EOP) the appropriate entities, such as CEQ, develop a national
adaptation plan that includes setting priorities for Federal,
State, and local agencies. CEQ generally agreed with our
recommendation.
Some of our other recent climate change-related reports offer
additional examples of the types of actions Federal agencies and the
Congress could take to assist States and communities in their efforts
to adapt. Our August 2007 report, for example, recommended that certain
agencies develop guidance advising managers on how to address the
effects of climate change on the resources they manage.\20\
Furthermore, our May 2008 report on the economics of policy options to
address climate change identified actions the Congress and Federal
agencies could take, such as reforming insurance subsidy programs in
areas vulnerable to hurricanes or flooding.\21\
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\20\ GAO-07-863.
\21\ Climate Change: Expert Opinion on the Economics of Policy
Options to Address Climate Change, GAO-08-605, (Washington, D.C.: May
9, 2008).
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funding for adaptation and other federal climate change activities
could be better tracked, reported, and aligned with strategic
priorities
Our May 2011 report on Federal climate change funding found that:
--agencies do not consistently interpret methods for defining and
reporting the funding of climate change activities;
--key factors complicate efforts to align such funding with strategic
priorities; and
--options are available to better align Federal funding with
strategic priorities, including governmentwide strategic
planning.\22\
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\22\ GAO-11-317.
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Any effective Federal climate change adaptation strategy will need
to ensure that Federal funds are properly tracked and that funding
decisions are aligned with strategic priorities. Given the
interdisciplinary nature of the issue, such alignment is a challenge as
formidable as it is necessary to address.
In our report, we identified three methods for defining and
reporting climate change funding, foremost of which is guidance
contained in OMB's Circular A-11.\23\ The circular directs agencies to
report funding that meet certain criteria in three broad categories--
research, technology, and international assistance. According to OMB
staff, Circular A-11 is the primary method for defining and reporting
long-standing ``cross-cuts'' of funding for climate change activities.
Interagency groups, such as USGCRP have collaborated in the past with
OMB to clarify the definitions in Circular A-11, according to comments
from CEQ, OMB, and OSTP.\24\
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\23\ The other methods identified by respondents were guidance from
interagency programs and periodic ``data calls'' to collect information
for unique reporting needs.
\24\ CEQ, OMB, and OSTP submitted consolidated technical comments
on our May 2011 report. These comments are reflected in this statement
as appropriate.
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Our work suggests that existing methods for defining and reporting
climate change funding are not consistently interpreted and applied
across the Federal Government.\25\ Specifically, for our May 2011
report, we sent a Web-based questionnaire to key Federal officials
involved in defining and reporting climate change funding, developing
strategic priorities, or aligning funding with strategic priorities.
Most of these respondents indicated that their agencies consistently
applied methods for defining and reporting climate change funding. Far
fewer respondents indicated that methods for defining and reporting
climate change funding were applied consistently across the Federal
Government. Some respondents, for example, noted that other agencies
use their own interpretation of definitions, resulting in inconsistent
accounting across the Government. Respondents generally identified key
reasons agencies may interpret and apply existing methods differently,
including difficulty determining which programs are related to climate
change.\26\ In comments to our May 2011 report, CEQ, OMB, and OSTP
noted that consistency likely varies by method of reporting, with
Circular A-11 being the most consistent and other methods being less
so.
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\25\ In GAO-11-317 we analyzed OMB funding reports and responses to
a Web-based questionnaire sent to key Federal officials with the
assistance of the EOP and interagency coordinating bodies.
\26\ These key reasons are discussed in detail in our May 2011
report: GAO-11-317.
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In addition, our work identified two key factors that complicate
efforts to align Federal climate change funding with strategic
priorities across the Federal Government. First, Federal officials lack
a shared understanding of priorities, partly due to the multiple, often
inconsistent messages articulated in different sources, such as
strategic plans.\27\ Our review of these sources found that there is
not currently a consolidated set of strategic priorities that
integrates climate change programs and activities across the Federal
Government. As we stated in our May 2011 report, in the absence of
clear, overarching priorities, Federal officials are left with many
different sources that present climate change priorities in a more
fragmented way. The multiple sources for communicating priorities
across the climate change enterprise may result in conflicting messages
and confusion.
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\27\ These sources include:
-- strategic plans for interagency programs and agencies;
-- executive-level guidance memoranda;
-- the development of new interagency initiatives;
-- regulations and guidance memoranda;
-- international commitments; and
-- testimony of Federal executives before the Congress.
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The second key factor that complicates efforts to align Federal
funding with priorities is that existing mechanisms intended to do so
are nonbinding, according to respondents, available literature, and
stakeholders. For example, some respondents noted that the interagency
policy process does not control agency budgets and that agencies with
their own budget authority may pay little attention to Federal
strategic priorities. In other words, Federal strategic priorities set
through an interagency process may not be reflected in budget decisions
for individual agencies.
As OSTP officials acknowledged to us, ``The major challenge is the
need to connect climate science programs with broader inter- and intra-
agency climate efforts.'' In comments to our report, OSTP stated that
while significant progress is being made in linking the climate
science-related efforts, individual agencies still want to advance
initiatives that promote or serve their agency missions. This,
according to OSTP, yields a broader challenge of tying climate-related
efforts (science, mitigation, and adaptation) together into a coherent
governmentwide strategy.
Our May 2011 report identified several ways to better align Federal
climate change funding with strategic priorities, including:
--options to improve the tracking and reporting of climate change
funding;
--options to enhance how strategic climate change priorities are set;
--the establishment of formal coordination mechanisms; and
--continuing efforts to link related climate change activities across
the Federal Government.\28\ Specific options are discussed in
detail in our May 2011 report and include a governmentwide
strategic planning process that promotes a shared understanding
among agencies of strategic priorities by articulating what
they are expected to do within the overall Federal response to
climate change. Also discussed in detail is an integrated
budget review process that better aligns these priorities with
funding decisions through a more consistent method of reporting
and reviewing climate change funding.
---------------------------------------------------------------------------
\28\ These were identified by respondents, available literature,
and stakeholders.
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Federal entities are beginning to implement some of these options.
For example, there has been some recent progress on linking related
Federal climate change programs, according to OSTP. Specifically, OSTP
stated that the science portion of the CEQ, NOAA, and OSTP-led Climate
Change Adaptation Task Force is being integrated within USGCRP. OSTP
also stated that it is working to create an interagency body that will
bring together agencies that provide climate services to allow for
better links between climate services and other Federal climate-related
activities.
To further improve the coordination and effectiveness of Federal
climate change programs and activities, we recommended in our May 2011
report that the appropriate entities within the EOP, in consultation
with the Congress, clearly establish Federal strategic climate change
priorities and assess the effectiveness of current practices for
defining and reporting related funding.
Chairman Durbin, Ranking Member Moran, and members of the
subcommittee, this concludes my prepared statement. I would be happy to
respond to any questions that you or other Members of the subcommittee
may have.
Appendix
WHY THE GAO DID THIS STUDY
A 2009 assessment by the USGCRP found that many types of extreme
weather events, such as heat waves and regional droughts, have become
more frequent and intense during the past 40 to 50 years. According to
the assessment, changes in extreme weather and climate events will
affect many aspects of society and the natural environment, such as
infrastructure. In addition, the Department of Defense found that
climate change may act as an accelerant of instability or conflict,
placing a burden to respond on militaries around the world.
According to the National Academies, USGCRP, and others, greenhouse
gases already in the atmosphere will continue altering the climate
system into the future regardless of emissions control efforts.
Therefore, adaptation-defined as adjustments to natural or human
systems in response to actual or expected climate change--is an
important part of the response to climate change.This testimony
addresses:
--the actions Federal, State, and local authorities are taking to
adapt to climate change;
--the challenges that Federal, State, and local officials face in
their efforts to adapt and actions Federal agencies could take
to help address these challenges; and
--the extent to which Federal funding for adaptation and other
climate change activities is consistently tracked and reported
and aligned with strategic priorities. The information in this
testimony is based on prior work, largely on the GAO's recent
reports on climate change adaptation and federal climate change
funding.
WHAT GAO FOUND
Federal, State, and local authorities are beginning to take steps
to adapt to climate change. Federal agencies are beginning to respond
to climate change systematically through an Interagency Climate Change
Adaptation Task Force formed to recommend key components for inclusion
in a national adaptation strategy. Individual agencies are also
beginning to consider adaptation actions. For example, in May 2009, the
Chief of Naval Operations created Task Force Climate Change to address
the naval implications of a changing Arctic and global environment.
Some State and local government authorities were beginning to plan for
and respond to climate change impacts, the GAO reported in 2009. For
example, the State of Maryland had a strategy for reducing
vulnerability to climate change, which focused on protecting habitat
and infrastructure from future risks associated with sea level rise and
coastal storms. In another example, King County, Washington,
established a countywide flood control zone district to upgrade flood
protection facilities and increase the county's resilience to future
flooding, among other things.
Federal, State, and local officials face numerous challenges in
their efforts to adapt to climate change, and further Federal action
could help them make more informed decisions. These challenges include
a focus of available attention and resources on more immediate needs
and insufficient site-specific data--such as local projections of
expected climate changes. The lack of such data makes it hard to
understand the impacts of climate change and thus hard for officials to
justify the cost of adaptation efforts, since future benefits are
potentially less certain than current costs. The GAO's October 2009
report identified potential Federal actions for improving adaptation
efforts, including actions to provide and interpret site-specific
information, which could help officials understand the impacts of
climate change at a scale that would enable them to respond. In a May
2008 report on the economics of policy options to address climate
change, the GAO identified actions Congress and Federal agencies could
take, such as reforming insurance subsidy programs in areas vulnerable
to hurricanes or flooding.
Funding for adaptation and other Federal climate change activities
could be better tracked, reported, and aligned with strategic
priorities. The GAO's report on Federal climate change funding suggests
that methods for defining and reporting such funding are not
consistently interpreted and applied across the Federal Government. The
GAO also identified two key factors that complicate efforts to align
funding with priorities. First, officials across a broad range of
Federal agencies lack a shared understanding of priorities, partly due
to the multiple, often inconsistent messages articulated in different
policy documents, such as strategic plans. Second, existing mechanisms
intended to align funding with government-wide priorities are
nonbinding and limited when in conflict with agencies' own priorities.
Federal officials who responded to a Web-based questionnaire, available
literature, and stakeholders involved in climate change funding
identified several ways to better align Federal climate change funding
with strategic priorities. These include a governmentwide strategic
planning process that promotes a shared understanding among agencies of
strategic priorities by articulating what they are expected to do
within the overall Federal response to climate change.
Senator Durbin. Thank you very much. I mentioned earlier,
Mr. Trimble is with the GAO and has published, at least, his
climate change adaptation publication, that I believe was
issued on July 28. Is that correct?
Mr. Trimble. Yes, we have a written statement for today's
hearing----
Senator Durbin. Good.
Mr. Trimble [continuing]. A longer statement.
Senator Durbin. Thank you very much. Kathryn Sullivan, as I
mentioned earlier, is with the NOAA and is our next witness.
Please proceed.
STATEMENT OF KATHRYN D. SULLIVAN, Ph.D., ASSISTANT
SECRETARY OF COMMERCE FOR ENVIRONMENTAL
OBSERVATION AND PREDICTION, NATIONAL
OCEANIC AND ATMOSPHERIC ADMINISTRATION,
DEPARTMENT OF COMMERCE
Dr. Sullivan. Thank you, Chairman Durbin and Ranking Member
Moran, for this opportunity to testify on Federal disaster
budgeting and whether our Nation is weather ready. As you
mentioned, I am from the NOAA and am the deputy administrator
there. The chairman just gave a very cogent and remarkable
account of the sequence of events that we've seen so far this
year in severe weather and the great toll that they've taken on
our country to date.
I won't repeat that long string of events, but it is
compelling, indeed, and in fact, the trends are moving in a
direction that suggest we will have more such events. The
NOAA's role in supporting Federal disaster budgeting for these
events is to predict them ahead of time, to observe them in
real time, and to help people prepare in advance for the
impacts they're likely to have.
This advance awareness is, in fact, the very foundation of
a weather-ready Nation. Businesses, State and local
governments, and our citizens rely on the NOAA for reliable
weather and water forecasts to underpin their responses and
their long-range planning. We've made tremendous strides in our
forecast and warning capability over the past few decades.
Our lead time for tornadoes has doubled since we modernized
our technology and infrastructure in the 1980s and early 1990s.
We've made significant leaps in our seasonal predictive
capability, due mainly to researching the weather patterns
associated with El Nino and La Nina, and also improvements in
numerical modeling methods.
Advances in understanding these, and other larger-scale
phenomena, and their relationship to high-impact weather events
has been the key to giving us the ability to help the Nation to
give the Nation advance notice and time to prepare.
For example, we were able, this year, to provide the
Midwest with spring flood outlooks as early as January, and to
foresee the continued severity of Texas' historical drought.
Even as our predictions improve, however, factors such as
demographic trends and population growth make society more
vulnerable than ever to high-impact events. Nearly 90 percent
of all Presidentially declared disasters are weather- and
water-related. And as the chairman noted, studies show that
frequency of these events is increasing.
As a result, many concerns from agriculture to city
planners, business, and the military, are looking for ways to
increase their resilience now.
The city of Chicago, heeding recent NOAA data on trends,
and our analytical climate support, is preparing for the
likelihood of more intense storms and rainfall, along with
warmer temperatures. Similar adaptation planning is underway in
New York City, with particular focus on the risk of flooding
from rising sea level.
The Navy's Task Force on Climate Change has advised that
service to prepare to police the equivalent of an extra sea, as
Arctic ice melts. These decisionmakers and many others, are
using NOAA science and support to take mitigating steps now in
order to increase their resilience to these events and reduce
the potential of severe societal and economic impacts. They
realize that the past is, indeed, no longer prologue.
In my written testimony, I describe the four pillars that
support the NOAA's, i.e., the Nation's, predictive
capabilities: environmental observations; including weather
satellites; computer modeling; scientific research; and of
course, our people, the technical experts who provide the
forecasts, warnings, and decision assistance. To improve both
our short-term, local-impact forecasts, and the long-range
outlooks that enable advance planning, we need to invest in
each of these pillars. As President Obama said in his address
to the Nation on Monday, while we all want and need a
Government that lives within its means, there are still things
we need to pay for as a country, such as weather satellites.
I need hardly note to this body that the funding for that
critical infrastructure is in jeopardy this year. The NOAA's
Federal, academic, and private sector partners play critical
roles in mitigating the impacts of weather and water events. We
work hand-in-hand with our Federal partners, such as the U.S.
Geological Survey (USGS), the Army Corps of Engineers, and the
Federal Emergency Management Agency (FEMA).
This quartet of core partners often acts as conveners and
integrators of necessary information and people, including
State and local emergency officials and managers.
This is just one key part of our efforts to prepare for and
mitigate impacts. We work very closely together to minimize
redundancies and enhance the sum of our parts. Our combined
efforts, before and during this year's historical floods,
provide an excellent example of the efficacy of these
partnerships.
The spring flood outlooks the NOAA issued in January along
with local decision support, allowed many communities to take
actions that limited flood impacts, including massive levee
reinforcements to, eventually, precautionary evacuations. FEMA
and the Red Cross prepositioned assets. The USGS ensured the
river gauges were operational.
We can do better. The NOAA, the USGS, and the Corps of
Engineers recently signed a memorandum of understanding to
begin significant advancement of our joint efforts in water
resource observations, prediction, and management. We've
committed to a framework that will provide an integrated,
common operating picture for water resources and management
nationwide.
This is known as the Integrated Water Resource Science and
Service Initiative (IWRSSI). This is just one of many ways in
which the NOAA is working to improve our ability to provide
climate information and services effectively to public and
private sector partners.
In closing, I'd like to emphasize that the Nation's
investments in the NOAA's weather prediction and warning
capabilities have directly saved lives this year.
PREPARED STATEMENT
We are clearly experiencing a trend toward more high-impact
weather and water events. Thanks to the Congress' support, the
NOAA, today, is able to help the Nation anticipate their
development and prepare for their impacts.
The NOAA is committed to continual improvement of our
predictive capabilities, and working with our Federal and
private sector partners, to providing the highest level of
preparedness and promoting our Nation's resilience to these
events. Thank you, Mr. Chairman, Mr. Moran, and I look forward
to any questions you may have.
[The statement follows:]
Prepared Statement of Kathryn D. Sullivan, Ph.D.
Good morning Chairman Durbin, Ranking Member Moran, and members of
the subcommittee. My name is Dr. Kathryn D. Sullivan, and I am the
Assistant Secretary of Commerce for Environmental Observation and
Prediction for the National Oceanic and Atmospheric Administration
(NOAA). Thank you for the opportunity to testify today at this hearing
about the Federal Government's role in mitigating the economic impact
of severe weather events. High-impact weather sometimes takes the form
of relatively short-lived, but extreme events such as tornados, flash
floods, hurricanes, wildfires, tsunamis, dust storms, or heat waves--
but also of longer-term events such as floods and drought, which have
broader impacts across many economic sectors. The NOAA's short-term
weather forecasts of conditions out to about 2 weeks have been critical
to saving lives and property in the days leading up to and during the
extreme events we've been seeing this spring and summer. The NOAA's
long-range weather and seasonal forecasts, also known as ``climate
forecasts,'' have been critical to making the advance planning
decisions, from weeks to months ahead of time, that allow rapid
response to the onset of these weather events.
An Historic Year in the Making
The year 2011 has already established itself in the record books as
an historic year for weather-related disasters and it is not over--in
fact hurricane season is just getting underway. Just past the year's
midpoint, we have already seen eight $1-billion-plus disasters. Total
damages from weather- and water-related events since January for the
United States are well more than $32 billion and climbing (Lott, et al.
2011). Tied for fifth, 2011 is as the deadliest tornado year for the
United States since modern recordkeeping began in 1950, with 537 people
killed so far. April 2011 ranks as the most active tornado month on
record with 875 tornadoes, breaking the previous record of 542 set in
2003. More tornadoes occurred on April 27 of this year than any other
day in the past 61 years. On May 22, a large portion of Joplin,
Missouri was devastated by an EF-5 (winds greater than 200 mph)
tornado, resulting in more than 150 fatalities and more than 1,000
persons injured. The Joplin tornado was the deadliest this year and is
ranked seventh among the deadliest tornadoes in U.S. history.
Prime wildfire conditions prevailed across portions of the Southern
Plains and Southwestern States, with a record breaking 1.79 million
acres burned across the country in April alone, with Texas, New Mexico,
and Arizona bearing the brunt of the wildfire activity. Nearly 6
million acres have burned nationwide--double the 10-year average by
this time of year.
Fueled by record-setting precipitation totals, historic flooding
has hit the Midwest and Ohio Valley, from the smallest streams to the
largest rivers. The Ohio Valley region had its wettest April on record,
and the record goes back to 1895 for some States. Record breaking heavy
rains across Montana and the Dakotas, combined with runoff from record
winter snowpack, caused tremendous flooding across those States, with
Minot, North Dakota, being among the hardest hit. Forecasts now
indicate this season could rival the Great Flood of 1993. In that year,
the Upper Midwest endured persistent, record-breaking floods from April
through August, impacting nine States and causing more than $25 billion
in damages (adjusted for inflation)(Lott, et al. 2010). The effects of
floods are felt far downstream as well. Following the 1993 flood, the
spatial extent of the hypoxic zone, or ``dead zone'' in the Gulf of
Mexico more than doubled its size, to more than 18,000 km\2\, and
persisted at that size through midsummer 1997. The tremendous amount of
water flowing into the Gulf of Mexico from this year's record spring
flooding is expected to cause the largest ever ``dead zone'',
surpassing that of 1993 (Rabelais, et al 2011). Dead zones--areas
lacking the necessary oxygen and salinity to fuel marine life--are
primarily caused by the effects of runoff from floods, which carry not
only the upstream sediments such as agricultural nutrients, but also
the tremendous freshwater influx to the gulf waters. This stimulates an
overgrowth of algae that sinks, decomposes, and consumes most of the
life-giving oxygen supply in the water. The Gulf of Mexico dead zone is
of particular concern because it threatens valuable commercial and
recreational gulf fisheries that generate about $2.8 billion annually.
DEPICTION OF GULF OF MEXICO HYPOXIA ZONE IMAGE
Source.--NOAA.
WHAT IT MEANS
Nearly 90 percent of all Presidentially declared disasters are
weather and water-related, and our vulnerability to the impacts is
increasing as our population grows. As shown in the chart below, the,
the number of these events is trending upward, with 2011's numbers on
track to surpass last year's record.
Source.--Munich Re NatCatSERVICE.
Over the past 30-plus years, the United States has seen a total of
107 weather-related disasters each totaling more than $1 billion in
damage. Total standardized losses since 1980 exceed $750 billion.
Demographic trends and population growth and an increased reliance
on technology, coupled with this trend in extreme weather events, have
made our society more vulnerable to high-impact events. As a result,
many agricultural, business, and urban planners are looking for ways to
increase community resilience now. For example, the city of Chicago is
taking steps to prepare for the likelihood of intense storms striking
more often, of rainfall events causing more flooding, and of warmer
temperatures. Local climate studies, along with recent trends such as
an increase in the frequency of heavy rainfall events, have led them to
conclude that this is the soundest action to take in order to mitigate
the cost and impact of these events. New York City is also engaged in
adaptation planning, with particular focus on the risk of flooding from
rising sea level. The Navy's Task Force on Climate Change has advised
that the Navy should prepare to police the equivalent of an extra sea
as the Arctic ice melts. These cities and organizations, among many
others, recognize the need to understand changes and trends in weather
patterns, and to apply this to planning that may reduce vulnerability
to high-impact weather and water events. Their recognition for the need
to reduce their vulnerability to weather and water extremes is an
important first step. However, there is much more that needs to be done
in other sectors of our economy and with the general public to increase
our resiliency to the impacts of these events.
There is more that can be done, and that communities and businesses
are mobilizing to do. This is why the NOAA's mission to understand and
predict changes in climate, weather, oceans, and coasts, to share that
knowledge and information with others, and to conserve and manage
coastal and marine resources is so vital. Our vision for healthy
ecosystems, communities, and economies, that are resilient in the face
of change, can lead to improved economic viability of weather-dependent
sectors like agriculture and other businesses, as well as more lives
saved.
THE VARIOUS ROLES OF NOAA
Many Federal agencies have a critical role in preparing for weather
and water disasters, including the United States Geological Survey
(USGS), the United States Army Corps of Engineers (USACE), and the
Federal Emergency Management Agency (FEMA). The NOAA works
collaboratively with these Federal agencies to ensure preparedness and
a coordinated approach to preparedness.
Research, Observations, and Prediction
NOAA scientists have been at the forefront of weather and climate
science, forecasting and public preparedness for decades--our science
helps save lives and livelihoods. The NOAA has a leading role in
understanding changes in weather and climate extremes, such as trends
in severe local storms and extremes in precipitation--too little or too
much, too often or too infrequent.
Longer lead-time forecasts for droughts, seasonal flooding, heavy
rainfall events, heat waves, and cold spells provide tremendous
economic value for the Nation. The NOAA provides a spectrum of critical
information across a range of time and space scales, which is used by
government, business, emergency managers, planners, and the public.
That information's value increased when businesses, farmers, energy
producers and utilities, as well as the general public, are prepared
and have effective plans of action to mitigate impacts.
Our Nation's environmental predictive capabilities are supported by
four foundational pillars: observations, computer models, research, and
our people, who provide forecasts, warnings, and decision assistance to
key decisionmakers. By strengthening the pillars--through improved
satellite and in-situ observations, computational capacity, and coupled
atmosphere, ocean, land models, and necessary research--we can
revolutionize the forecast process across the entire spectrum, from
relatively small-scale, short-range applications to long-range weather
and climate predictions. For example, on the larger scale, coupled
models provide improved simulations of the interaction between the
ocean and atmosphere, resulting in more accurate predictions of
tropical cyclone behavior. On smaller scales, higher-resolution
observations and models can provide the type of short-term severe
weather predictions that will one day allow us to ``warn on forecast,''
or know up to 60 minutes ahead of time where a tornado will touch down.
We know that shifts in weather patterns are often regional in
nature, and have variable time spans. For example, El Nino and La Nina,
which have become household words, are generally predictable over
fairly definable areas and time spans. During the 1997-1998 El Nino and
1998-1999 La Nina, the U.S. agricultural sector experienced damages of
$2.4 billion-$2.8 billion and $3.6 billion-$10.7 billion (in 2010
dollars), respectively (Adams, et al. 1999). We are coming to
understand many of these larger-scale phenomena, such as the North
Atlantic Oscillation, which is a change in the water temperature in the
North Atlantic that is strongly correlated with heavy snowfall events
in the Mid-Atlantic and Northeast States. However, we still do not
always fully understand how these pattern shifts relate to or affect
one another, and there are likely many other phenomena we have yet to
discover. For example, while there are some known correlations between
the La Nina phase and tornadic activity across the United States,
significant research is required to improve our scientific
understanding of links between climate patterns and local weather
extremes.
Our tornado warnings have improved significantly over the past two
decades primarily because of past research efforts. More research would
help us better understand the rapid evolution of severe thunderstorms
and why some produce tornadoes and others do not. We face a similar
challenge with our understanding of hurricanes. While our track
forecasts have improved greatly--our forecast location for 5 days out
is now as accurate as the forecast location for 3 days out was 15 years
ago--we still do not understand what causes some tropical systems to
jump two intensity categories in less than 24 hours, while others do
not. Understanding these atmospheric evolutions will help us increase
forecast lead time and accuracy for these damaging and deadly storms.
Getting the Word Out
As the Federal Government's sole official voice for issuing
warnings during life-threatening weather events, and as an established
reliable and trusted source, the NOAA provides the Nation's first line
of defense against severe weather. NOAA operates the Nation's
geostationary and polar orbiting satellites, a nationwide network of
Doppler weather radars and surface observing stations. Scientists
develop computational models that combine these observations with
equations describing the physics of our atmosphere and ocean, and our
forecasters interpret and deliver critical information. Alerts and
warnings for severe weather and other near-term hazards (tornados,
hurricanes, severe thunderstorms, winter storms, most floods, chemical
spills, volcanic ash, tsunami, space weather, etc.,) are delivered
through multiple redundant mechanisms, including: NOAA Weather Radio,
which triggers the Emergency Alert System; NWSChat, which focuses on
real-time coordination with local core customers in the broadcast media
and emergency management; the Internet; and, through our private sector
partners--commercial television and radio, which communicate critical
information to much larger audiences and effectively inform those in
harm's way to take appropriate action.
Preparedness
Our prospects for success in this role, and of achieving our vision
of resilient communities, lie in our unique enterprise capabilities.
The goal of disaster resilience is to enhance the capacity of a
community exposed to hazards to adapt, by resisting or changing, in
order to reach and maintain an acceptable level of functioning and
structure. The preparedness challenge remains essentially the same
across both short-term and long-term weather and water events: public
awareness, education, and plans of action to mitigate impacts on the
personal, community and regional scales provide the best protection
against potential disasters. The NOAA has long-held and strongly
established ties to the emergency management community, through State,
local and tribal officials, which help ensure appropriate action is
taken to prepare communities for weather and water events. The NOAA and
its partners, such as the National Sea Grant network, use integrated
research, training, and technical assistance to enhance the ability of
communities to prepare for, respond to, and rebuild after disasters
strike. For example, we are developing a Coastal Resilience Index that
provides a tangible way for communities to identify gaps and examine
how prepared they are for storms and storm recovery, and provide
guidance on how to increase resilience through measures including
strengthening infrastructure or adopting stricter building codes.
The historic floods currently spanning from Montana across the
Dakotas, into the northern and central plains and southern Mississippi
Valley are an excellent example of why we need to prepare for
catastrophic events. The NOAA/National Weather Service (NWS) spring
flood outlook highlighted those particular areas as having the
likelihood of major flooding. Our River Forecast Centers and local
Weather Forecast Offices worked with Federal, State, and local
emergency managers and planners to help prepare for and plan to
mitigate the impact of the flooding. Based on our forecasts,
communities took extensive actions to limit the impact of the flooding,
including massive levee reinforcements and eventual evacuations to
prevent loss of life. FEMA prepositioned relief assets, and the USGS
ensured their river gauges were operational--all of the agencies worked
together to help mitigate the potential impact.
The NOAA often plays a key Federal role throughout these events as
an integrator of the many Federal capacities applied to alert
communities and regions to an event and its likely impacts, and to help
mitigate those impacts as they're occurring and afterward. For example,
due to the large extent of the Midwest floods this year, we are
predicting a very extensive ``dead zone'' in the Gulf of Mexico, due to
the excessive fresh water flowing into the gulf. This will have a
significant impact on the lives and livelihoods of those in the gulf
region. The NOAA is working to ensure the gulf region, its communities,
and the commercial interests are aware of the impacts and timing of
this event, and supporting mitigation efforts.
Unfortunately, in spite of our best efforts, severe weather events
still cause loss of life and significant damage. More of this could be
mitigated with more timely, accurate and focused warnings. The impacts
and lives lost from the disasters mentioned above would have been far
worse without critical data input of observations from satellites and
in-situ observations, and the extensive work of the NOAA and our
Federal, non-Federal, State, and local partners to improve the Nation's
preparedness for these events through education and outreach. However,
as evidenced by the tragic loss of life in a number of these events,
there is a long way to go to truly achieve a weather-ready Nation.
ACHIEVING A WEATHER- AND WATER-READY NATION
We have made tremendous strides thanks to the modernization of the
NWS two decades ago. Because of advances in data assimilation and
modeling, and critical sampling of the atmosphere from our polar
orbiting satellites and geostationary satellites, model forecasts for 3
days and beyond have improved substantially. For example, our forecasts
for 3 days away are now as accurate as they were for 2 days away only
10 years ago. These improvements have allowed for advance lead times
between first alert and the actual event.
For example, leading up to the ``Snowmageddon'' event of February
2010, the NOAA was able to detect the storm threat 7-plus days in
advance and begin alerting the east coast up to 5 days in advance of
the storm. This allowed States to implement contingency and continuity
of operations plans, airlines to rearrange flights, and the retail
industry to pre-stock their shelves. As a result, there was minimal
impact to national and local airline and highway transportation. This
long lead time was made possible in large part by observations obtained
by NOAA's polar-orbiting satellite and numerical weather prediction
models. Polar-orbiting satellites are the backbone of all model
forecasts at 3 days and beyond; however, the launch of the next
generation of the NOAA's polar-orbiting satellites, the Joint Polar
Satellite System (JPSS), has been delayed by the fiscal year 2011
appropriations process. As a result, the NOAA is faced with a nearly
100 percent chance of a data gap in the U.S. civilian polar orbit, on
which both civilian and military users rely, by late 2016 to early 2017
when the current polar satellites reach the end of their life
expectancy. The JPSS is a critical part of NOAA's future infrastructure
needed to continue our path of forecast improvement--and to maintain
what we have built during the last 30 years.
The NOAA was also able to highlight the likelihood for severe
weather in southwest Missouri several days in advance of the May 22
Joplin tornado. Even our lead times for imminent hazards have
increased: the tornado warning for the Joplin area was issued 24
minutes before the tornado struck, a substantial improvement over the
5-minute advance warnings that were typical just two decades ago. We
have achieved similar forecast improvements for hurricanes. The NOAA's
hurricane forecast track error has decreased 60 percent since 1990. All
these advances have come about through the close coupling of research
and operations in NOAA's weather enterprise. All of these advances have
helped save lives and reduce the economic impacts of severe weather.
With the high death toll and impacts we've seen this year, we take
little solace in knowing that outcomes could have been worse without
the extensive work of NOAA and our Federal, non-Federal, State, and
local partners. There is much more that needs to be done to improve the
Nation's resilience for these events. Research, education, and outreach
are the essential ingredients to improving preparedness and via
improved forecast and warning accuracy and lead times. Realizing a
weather-ready Nation, where society is prepared for and responds to
weather-dependent events, is vital.
Weather-related catastrophes with high economic and social costs
are not just acute events like tornado outbreaks or hurricanes, but
also longer-term events such as seasonal or prolonged flooding,
droughts, wildfire outbreaks, and other phenomenon brought on or
enhanced by environmental change. These forces of nature can sometimes
exact an even higher cost, since they occur over longer periods of
time, impact greater areas, and require longer-term planning to
mitigate. The NOAA has significant expertise in this area, and our
products, services, information, and planning are being used more
broadly and sought out more fervently than ever before. One example is
the NOAA's work with our partners as part of the Devils Lake Task
Force. Devils Lake is an enclosed basin in north-central North Dakota
with no natural outlet. The water level in the lake has risen more than
50 feet in the last 50 years. Flood damages in the Devils Lake Basin
have exceeded $300 million and inundated more than 138,000 acres since
1993 (Wiche, et al. 2010), and increased in volume by six times. The
community's concerns continue to grow regarding how much more of their
land and homes, their businesses and infrastructure, the lake will
consume, and how much more damage it may cause. The NOAA is using our
weather and climate information--spanning from daily weather forecasts
to seasonal outlooks and local and regional climate trends and
analysis--to provide decision-support services to the local community,
as well as resource management and disaster-response partners at FEMA,
USGS, USACE, USDA, and others. It is this type of science-based support
that these decisionmakers demand and need as they plan current and
future actions to better prepare for both the continued flooding, and
the potential impacts of a spill catastrophe should the lake reach
critical spill elevation.
As noted earlier, demographic trends and population growth, plus
our increased reliance on technology, have made our society more
vulnerable to extreme weather. The NOAA has started a national dialog
with the Nation's top experts in broadcast meteorology, emergency
management, and the weather industry to examine what is happening with
severe weather and what can be done in the short- and long-term to
improve the Nation's severe weather forecasts and warnings, and
community preparedness. Included in this effort are social sciences,
innovative technologies, and social media to improve our effectiveness
in reaching those in harm's way and provoking appropriate response,
whether to the urgency of a tornado or tsunami warning, or to the
longer-term likelihoods of flooding or drought. For example, most NWS
offices have established Facebook pages, providing an additional medium
for conducting outreach and education, as well as highlighting
information about ongoing or upcoming weather events. Additionally, the
NOAA uses NWSChat to give private sector partners an invaluable
opportunity to interact with NWS experts, and to refine and enrich
their communications to the public. Moreover, more private companies
are carrying weather warnings on wireless networks, providing real-time
alerts to your cell phone or email.
Sea level rise, the increased number and intensity of heavy
rainfall events and strong coastal storms, and other natural and human
hazards are putting more people and property at risk, with major
implications for human safety, economic vitality, and environmental
health, especially in coastal areas. A new study by the NOAA indicates
that coastal communities along the U.S. east coast may now be at
greater risk of inundation during El Nino years due to higher sea
levels, accompanied by more destructive storm surges. To achieve a
weather-ready Nation, it is essential that residents of communities
understand these risks and learn what they can do to reduce their
vulnerability and respond quickly and effectively when events occur.
The NOAA is working on a number of efforts to increase the
resilience of coastal communities. The NOAA's multi-mission National
Water Level Observation Network provides water level data that supports
near-term warnings conducted by the NWS for storm surge and tsunamis,
and provides long-term climatic records for sea level trends. The NOAA
has worked with many entities to help them incorporate sea level trend
guidance into their policy and planning documents. The NOAA also
maintains the National Spatial Reference System (NSRS), which is the
national coordinate system that defines position (latitude, longitude,
and elevation), distances and directions between points, strength of
gravitational pull, and how these change over time. The NSRS is a
network of precisely located, permanently marked, in-ground geodetic
reference points critical for accurate GPS use, and is critical to
determine an accurate depiction of the shoreline. Both systems are
needed to accurately model coastal inundation ranging from short-term
extreme events to long-term sea level changes.
A key component of achieving a weather-ready Nation is community
preparedness. NOAA's StormReady program works at the local level to
ensure communities, both inland and coastal, have the warning
capabilities and plans in place to help safeguard them against all
types of disasters. This effort is complemented by NOAA's Coastal
Storms Program (CSP), which is a nationwide effort to reduce loss of
life and mitigate impacts of storms on coastal communities and the
environment. CSP provides dedicated resources and expertise from across
NOAA to deliver capacity-building tools, training, data, and other
products and services to enhance hazard resilience in coastal
communities in particular. For example, NOAA is working with
communities along the Gulf of Mexico to provide a simple, inexpensive
method for leaders to perform a self-assessment of their community's
resilience to coastal hazards. The results help communities prioritize
what needs to be addressed before the next extreme event. Through these
various community resilience efforts, NOAA is placing an increased
focus on social science to better understand how and why decisions are
made at the State and local levels and how NOAA can improve its efforts
to communicate risk and uncertainty to the public at large.
Sustaining our commitment to existing services, while continuing to
improve our capacity to meet the Nation's weather and water needs,
requires targeted investments to shore up aging infrastructure, improve
scientific understanding, and implement enhanced services to reduce
risk to the Nation caused by weather and water. Today's services are
built upon earlier investments in innovative science and technology as
well as our highly skilled workforce. Our capacity to collect and
assimilate increasing amounts of data to improve model performance must
increase to realize their potential. This is achieved through making
critical improvements to science and technology. Future technology
improvements include continued polar and geostationary satellites, more
sophisticated radar coverage, observing systems, and improved computing
capabilities. These technology assets are crucial pieces of our
national infrastructure. The gap in data from the NOAA's JPSS will
significantly impact our ability to achieve a weather-ready Nation,
because it will degrade our ability to accurately forecast severe
weather events 3 days and beyond.
Water management decisionmakers also require a new generation of
water information, forecasts, and decision support. The NOAA is working
with its Federal partners USGS, USACE, and others to implement
Integrated Water Resources Science and Services, creating an
integrated, high-resolution common operating picture for water
information, supporting timely and critical water management decision
in full coordination and collaboration with forecasting and decision
support services.
We know that the NOAA forecasts, warnings, and community-based
preparedness programs are vital in enhancing the economy and saving
lives. It all starts with a commitment on improved forecasting and ends
with a weather-ready Nation in which businesses, governments, and
people are prepared to use those forecasts to mitigate impacts.
SUMMARY
To achieve an increase in community resilience and reduce the
Nation's vulnerability to weather- and water-related extreme events, we
must continue to improve predictions. Again, our Nation's environmental
predictive capabilities are supported by four foundational pillars:
observations, computer models, research, and our people. By
strengthening the pillars--through improved satellite and in-situ
observations, computing capacity, coupled atmosphere, ocean, land
models, and necessary research and science improvement--we can
revolutionize the forecast process across the entire spectrum from
relatively small-scale, short-range applications to long-range weather
and climate predictions.
The dual goals of preparing for and mitigating natural hazards
require the continuous commitment and partnership of many individuals
and sectors--from Federal, State, tribal, and local to public, private,
and academic. The investments made by the Congress and the
administration in NOAA's weather prediction and warning capabilities
directly save lives in the United States during these weather
disasters. NOAA remains committed to leading U.S. efforts to save lives
and property through preparedness, detection, modeling, and forecasting
efforts necessary for improved decisionmaking. Although nothing can
eliminate the physical threat that severe weather and natural hazards
pose, NOAA has demonstrated success in better predicting them, reducing
their impact, and helping vulnerable communities become more resilient
to their devastating effects--and will work to continuously improve its
natural hazards products and services to the Nation.
Senator Durbin. Thanks, Dr. Sullivan. James Rivera is here,
Associate Administrator, Office of Disaster Assistance, Small
Business Administration. Please proceed.
STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR,
OFFICE OF DISASTER ASSISTANCE, SMALL
BUSINESS ADMINISTRATION
Mr. Rivera. Good afternoon, Chairman Durbin, and Ranking
Member Moran, and distinguished members of the subcommittee. My
name is James Rivera and I'm the associate administrator for
the Office of Disaster Assistance at the SBA.
Thank you for inviting me to testify on my experience in
administering the Disaster Loan Program and how the SBA budgets
for its response in disasters.
The SBA is responsible for providing affordable, timely,
and accessible financial assistance, following a disaster to
businesses, homeowners, and renters. This financial assistance
comes in the form of low-interest loans to affected homeowners,
renters, businesses, and nonprofit organizations.
Since the SBA was created in 1953, we have provided more
than 1.9 million loans amounting in more than $49 billion. In
terms of recent activity, as a result of the recent spring
floods, tornadoes, and disaster events, the SBA has responded
in 13 States and has provided more than $220 million in loans
to homeowners and businesses. This is for uninsured losses.
With regards to budgeting, the Federal Credit Reform Act of
1990 requires the President's annual budget reflect the
estimated long-term costs of Federal credit programs on a net
present value basis. Accordingly, we estimate subsidy cost of
our credit program.
Subsidy models are based on the available, historical data,
so that the estimates can be performed, and therefore, the
budget formulation subsidy is broadly based on loans made in
response to historical disasters.
The Disaster Loan Model produces cash flow projections for
budget formulations, subsidy estimates, and re-estimates. The
model uses the historical performance of more than 650,000
loans since 1992 to project future cash flows. The model also
predicts individual loan performance based on current
performance, and the historical experience of loans with
similar characteristics.
Loan characteristics found predictive for disaster loan
behavior include whether the loan was made to a home, or a
business, the size of the loan, deferral period, type of
injury, and the age of the loan.
The SBA recognizes the added value of external modeling,
and uses this approach to gather information from these models
to provide additional event-specific information that will
refine and improve the SBA's ongoing response. The Department
of Homeland Security and FEMA have a tool called Hazards United
States (HAZUS) that is a loss-estimation methodology for
natural disasters in the United States.
HAZUS is a powerful program for analyzing potential losses
from floods, hurricanes, and earthquakes. The program couples
the latest scientific and engineering knowledge with advanced
geographic information systems technology to produce estimates
of hazard-related damage before, during, or after disaster.
The use of the HAZUS Program, allows the SBA to produce
more accurate, actionable, and timely information when
responding to natural disasters. We also incorporate this
information for our Scalability Model. The model is designed to
further refine and analyze disaster loan estimates for the
purpose of accurately correlating damage estimates into
actionable, and immediately staffing, budgetary projections.
This year, as in past years, Dr. Gerry Bell, a climate
specialist and research meteorologist at the NOAA's Climate
Prediction Center, will brief the SBA's senior management on
the NOAA's updated hurricane prediction.
Dr. Bell specializes in monitoring global climate
variability, especially patterns related to El Nino, and La
Nina, and other atmospheric processes. This briefing will aid
the SBA in our strategic planning efforts in this hurricane
season.
I would also like to quickly highlight some recent
improvements to our disaster operation. The SBA is partnering
with Agility Resource Solutions and we provide monthly webinars
on preparedness. We also partner with the Red Cross and
leverage the Ready Rating Program for homeowners and
businesses.
We've invested in our infrastructure and have increased the
number of workstations for disaster staff employees from 300 to
more than 2,100 work stations, which include 350 surge
workstations at another location. We've increased the capacity
of our computer system, the Disaster Credit Management System,
from 800 concurrent users up to 10,000 concurrent users.
PREPARED STATEMENT
Since Hurricane Katrina, the SBA has processed applications
within 10 days, with an average goal of 14 days for homes and
18 days for businesses. To put this in perspective, the average
processing during the 2005 gulf coast hurricanes was 74 days
for homeowners and 66 days for business loans.
I appreciate the opportunity to share with the subcommittee
the role the SBA plays in disaster recovery. We believe that
we're prepared to be effectively and efficiently respond to the
needs of disaster victims. I look forward to your questions and
thank you.
[The statement follows:]
Prepared Statement of James Rivera
Good afternoon Chairman Durbin, Ranking Member Moran, and
distinguished members of the subcommittee. Thank you for inviting me to
testify on my experiences administering the Small Business
Administration (SBA) Disaster Loan Program and how the SBA budgets for
its response to disasters.
Disaster assistance has been part of the SBA's mission since 1953.
Through the SBA's Office of Disaster Assistance (ODA), the SBA provides
affordable and timely financial assistance to disaster victims. This
financial assistance comes in the form of low-interest loans to
affected homeowners, renters, businesses, and nonprofit organizations.
Many disaster victims have insurance, which covers part or all of
the physical property losses due to a natural disaster. But for
disaster losses not covered by insurance, an the SBA loan is the
primary form of Federal financial assistance. Since the SBA's inception
in 1953, we have provided more than 1.9 million loans totaling more
than $49 billion to help disaster victims in the wake of natural--as
well as manmade--disasters. These loans are the only form of SBA
assistance not limited to small businesses. The majority of the SBA
disaster loans approved--about 80 percent--go to homeowners and
renters.
In terms of recent disaster events, in response to the severe
storms and flooding this spring, the SBA has approved more than 3,700
loans totaling more than $207 million. And last year, as a result of
the Deepwater BP oil spill, small businesses in the gulf region that
earn their living fishing in these waters, as well as seafood
retailers, boat yards, shipping companies, processing plants, and other
coastal small businesses faced the potential of tremendous financial
losses from having to shut down operations because of the oil spill.
The SBA assisted these small businesses by making Economic Injury
Disaster Loans (EIDL) available for small businesses in Louisiana,
Mississippi, Alabama and Florida, and approved $41 million to affected
small businesses.
THE SBA'S ROLE IN RESPONDING TO A DISASTER
The SBA is not a ``first responder agency'' following a disaster.
Rather, the SBA's role focuses on providing loans as part of the
recovery effort. The SBA carries out this role in coordination with
other government partners at the Federal, State, and local levels.
When the President makes a disaster declaration, various forms of
Federal assistance, including SBA's Disaster Loan Program, become
available. If the Federal Emergency Management Agency (FEMA) declines a
request for a declaration or if the State determines the damage is not
extensive enough to request FEMA assistance, the State can request an
``Administrative/Agency Declaration'' from the SBA's Administrator. And
if that request meets the SBA's damage requirements, area residents and
business owners may apply for SBA disaster assistance.
Disaster loans are a vital source of economic support in the
affected areas. As part of an overall effort to get victims back on
their feet, the SBA's disaster home loans of up to $200,000 help local
community members return and rebuild their homes. Moreover, businesses
and nonprofits of all sizes are eligible for loans of up to $2 million
to assist with any uninsured and otherwise uncompensated physical
losses sustained during a disaster. These funds are used to repair or
replace damaged physical property.
Additionally, the SBA offers EIDLs to small businesses, small
agricultural cooperatives, aqua culture businesses and most private
nonprofit organizations that have suffered economic injury caused by a
disaster. If a small business or organization is unable to meet
obligations and pay its ordinary and necessary operating expenses, an
EIDL loan can help. These loans provide working capital to businesses
or organizations. The maximum loan amount is $2 million combined for
both physical and economic injury.
In processing applications under longstanding program criteria, the
SBA does not price loans based on the types of disasters that occur--
interest rates for disaster victims are not based on the types of
exposure that have the potential of higher losses. Funds are available
and based on needs of each particular disaster and more specifically
the disaster victim and their damages. Unlike other financial
institutions, we do not use a progressive scale in determining interest
rates based on potentially higher loss rates. However, the SBA has a
responsibility to taxpayers to be a prudent lender and to not only
require a reasonable assurance of repayment ability, but also to impose
requirements upon disaster borrowers that will help minimize the
potential need for future disaster loans (e.g., through insurance
requirements mandated by regulations and SBA policy).
BUDGET FORMULATION SUBSIDY ESTIMATES
The Federal Credit Reform Act of 1990 requires that the President's
budget reflect the estimated long-term cost of Federal credit programs
on a net present value basis. Accordingly, credit agencies estimate the
subsidy costs of Federal credit programs prior to submission of the
President's annual congressional budget submission. Subsidy models are
oriented primarily toward preparing budget formulation subsidy
estimates based on the available historical data so that estimates can
be performed long before the fiscal year begins. For disaster
assistance loans, we cannot know what kinds of disasters will occur in
advance or how they will interact with other events. Therefore, the
budget formulation subsidy estimate is broadly based on loans made in
response to historical disasters.
The disaster loan model produces cash flow projections for budget
formulation subsidy estimates and re-estimates. The model uses the
historical performance of more than 650,000 loans disbursed since 1992
to project future cash flows. The model predicts individual loan
performance based on current performance and the historical experience
of loans with similar characteristics. Loan characteristics found
predictive for disaster loan behavior include whether the loan was made
to a home or a business, the size of the loan, grace period length,
type of injury (economic or physical), and age of the loan.
ADDITIONAL RESOURCES
The SBA recognizes the added value of external modeling approaches
and uses information gathered from these modeling approaches to provide
additional, event-specific information that will refine and improve the
SBA's ongoing response.
HAZUS-MH
Hazards-US/Multi-Hazard (HAZUS-MH) is the Department of Homeland
Security's loss-estimation methodology for natural hazards in the
United States. HAZUS-MH, also commonly referred to as The Risk Map
Assessment Tool, is a powerful program for analyzing potential losses
from floods, hurricanes and earthquakes. The program couples the latest
scientific and engineering knowledge with advanced geographic
information systems technology to produce estimates of hazard-related
damage before, during, or after a disaster.
The ODA is a strong partner in the HAZUS modeling community and
actively works with FEMA's HAZUS program management office and
developer community to strengthen and support Government and industry
use of HAZUS technology for responding to, and mitigating against,
potential disaster losses. Use of the HAZUS-MH program allows the ODA
to produce more accurate, actionable, and timely information when
responding to natural disasters.
In addition to HAZUS-MH, the primary model used by the ODA is the
Scalability Model. This model is a custom developed program exclusive
to the SBA. It was designed to further refine and analyze disaster loss
estimates from models such as HAZUS for the purpose of accurately
correlating damage estimates into actionable and immediate staffing and
budgetary projections.
The ODA has joined the Department of Homeland Security (DHS), FEMA,
and other Federal partners in establishing the first ever Geospatial
Concept of Operations (GeoCONOPS). The GeoCONOPS is an effort focused
on geospatial communities supporting the DHS and the emergency
management activities under the National Response Framework (NRF). It
is a multiyear effort designed to document the current geospatial
practices supporting NRF and Stafford Act activities. The participants
include the 15 emergency support functions, and other Federal mission
partners.
National Oceanographic and Atmospheric Administration (NOAA)
This year, as in years past, Dr. Gerry Bell, climate specialist and
research meteorologist at NOAA's Climate Prediction Center, will brief
SBA's Senior Management on NOAA's updated hurricane predictions. Dr.
Bell specializes in monitoring global climate variability, especially
patterns related to the El Nino, the multi-decadal cycle, and other
large-scale atmospheric processes. He is the chief editor and co-author
of the monthly Climate Diagnostics Bulletin, which provides the latest
El Nino analysis and diagnosis, along with a description and analysis
of global weather and climate conditions. This briefing will aid the
SBA in our strategic planning efforts this hurricane season.
Another step we took to help small business owners in these areas
who were repaying existing SBA disaster loans, was to allow them to
request a deferment. Additionally, the SBA strongly encouraged its
participating private lenders to consider on a case-by-case basis
deferment relief for borrowers with SBA-guaranteed 7(a) loans and 504
loans.
SIGNIFICANT IMPROVEMENTS SINCE HURRICANE KATRINA
Since 2005, we have seen a great deal of improvement in our
disaster program. While we fortunately had a light 2010 hurricane
season, in fiscal year 2010 we responded to more small-scale disasters
(51 agency declarations and 15 economic injury declarations) than in
the past 10 years combined. Following the 2005 gulf coast hurricanes,
the SBA faced severe challenges in providing disaster assistance in a
timely fashion. As a result, we made dramatic improvements in our
operations and processes. Today, by incorporating lessons learned,
SBA's Disaster Assistance Program has overhauled its processes and
improved response times. The SBA is now better prepared to process
loans faster, provide a better quality of service, and be more helpful
to disaster victims.
To ensure overall preparedness, the disaster program has increased
the number of workstations for disaster-assistance employees from 300
to more than 2,100, and we have brought online a ``surge'' center with
350 additional workstations. We are currently staffed at approximately
974 employees with a reserve force of more than 2,000. Additionally,
the SBA has the ability to request assistance from Small Business
Development Centers and other SBA resource partners.
The SBA has also improved its Disaster Credit Management System,
which now gives the agency improved technology to serve many users,
with increased disaster recovery capacity from 800 to 10,000 concurrent
users.
We have also processed applications within 10 days on average with
a goal of 14 days for home loans and 18 days for business loans. To put
this into perspective, the average processing time during the 2005 gulf
coast hurricanes was 74 days for disaster home loans and 66 days for
disaster business loans. Additionally, in August 2008, the SBA
introduced an electronic loan application that allows disaster victims
to apply for assistance online. Currently, this mechanism accounts for
approximately one-third of all applications submitted.
The SBA has also revamped the postapproval process, improving the
processes and tools for loan closings and funding disbursements. Our
emphasis is on customer service and accountability, with each approved
loan being assigned an individual case manager.
In regards to marketing and outreach, the SBA has developed an
aggressive plan to reach all potential applicants in an area before a
disaster strikes. We are concentrating on areas that are vulnerable to
recurring similar disasters to provide expanded outreach efforts before
the disaster occurs. Additionally, we have provided all SBA employees
with access to an online ``Disaster Tool Kit'' with detailed
information on the agency's role in preparedness, outreach, and
assistance.
The SBA has also signed a Memorandum of Understanding (MOU) with
the American Red Cross and the Agility Recovery Solutions. Both MOUs
are designed to promote disaster preparedness and educate potential
disaster victims on the benefits of advanced planning for disasters.
We have also instituted annual disaster trainings for the SBA's
Regional Administrators, District Directors, and Disaster Public
Information Officers. And finally, we are currently involved in an
overall assessment of our disaster assistance messaging, branding, and
outreach.
In closing, we appreciate the opportunity to share with the
subcommittee the role the SBA plays in small business disaster recovery
efforts. We firmly believe that the reforms we have instituted have
enabled us to be prepared to effectively and efficiently respond to the
needs of our Nation's disaster victims.
Senator Durbin. Thanks a lot for your testimony, Mr.
Rivera, and I will have a few questions for you. I'd like to
invite Dr. Wuebbles, at this point, to proceed with his
testimony.
STATEMENT OF DR. DONALD J. WUEBBLES, THE HARRY E.
PREBLE PROFESSOR OF ATMOSPHERIC SCIENCES,
UNIVERSITY OF ILLINOIS-URBANA, ILLINOIS
Dr. Wuebbles. Thank you. Thank you for the opportunity to
testify today. I'm professor in atmospheric sciences at the
University of Illinois and an expert in the physics and the
chemistry of the atmosphere.
Along with the many scientific articles I've published in
peer-reviewed literature, I've also been a leader in national
and international assessments to look at various concerns about
our climate system. As a son of an Illinois farmer, I know the
impacts of severe weather are of great concern, to me, the
people, and my country.
As we will discuss, the evidence is strong, and there is an
increasing trend of a--recent decades for severe weather,
especially very heavy precipitation events. Scientific analysis
also suggests that the likelihood for these events is likely to
further increase as our climate continues to change over this
century.
In today's testimony, I will focus on four main points
about severe weather events in the United States and their
relationship to changes occurring in our climate system. First,
there are strong indications that the United States is seeing
more extreme weather-related events in recent decades than in
the past.
We've already had some discussion about what's been going
on in--in 2011. We've seen more than $32 billion in damages
already this year, and that doesn't account for recent events
such as the flooding in Iowa, and in the Midwest, and the--on
the Missouri River, et cetera, wildfires in Arizona and New
Mexico during late June, or the heat waves that gripped most of
the country this last week. This year, 2011, is just part of
the picture.
Overall, there's been an increase in some--in key types of
extreme weather events, at--since at least 1980. Widespread
changes in temperature extremes have been observed over the
last 50 years. In particular, the number of heat waves,
globally, has increased and there has been a widespread
increase in the number of warm nights, cold days, cold nights,
and days with frost have become rarer.
Changes are also occurring in the amount, intensity,
frequency, and types of precipitation. I'll highlight a few
specific examples of the observed trends. First of all, we're
now seeing breaking--we're now breaking twice as many heat
records as cold records in the United States, and seeing this
over the last 50 years.
Since 1957, there has been an increase in the number of
historically top 1 percent of heavy precipitation events across
the United States, with an increase in such events of more than
30 percent in the Midwest and 67 percent in the Northeast.
Our ongoing analyses of the repeat or recurrent frequencies
of large precipitation storms, which, by the way, I'm doing,
the people from the NOAA, are showing that such events are
occurring more often than in the past. For example, the
historical 20-year storm in the Midwest, of roughly 4.4 inches
of precipitation in a single day, has now become the 12- to 13-
year storm event.
The pattern of precipitation change is one of increases
generally at high northern latitudes because of--as the
atmosphere gets warmer, it holds more moisture, and drying in
the tropics and subtropics over land, so the wetter getting
wetter and the dryer getting dryer.
Number two, there is clear scientific understanding that
the Earth's climate system is changing and that it is largely
happening because of human activities. There is no debate in
the scientific community, based on the peer-reviewed
literature, about the large changes occurring in the Earth's
climate or the connection of these changes to human activities,
largely the result of the burning of fossil fuels and other
human-related emissions.
The science is clear and convincing that climate change is
happening, happening rapidly, and happening primarily because
of human activities.
Number three, scientific analyses are now indicating a
strong link between changing trends in severe weather events
and changing climate. Every weather event that happens nowadays
takes place in the context of changes in this background
climate system.
Globally, the temperatures are higher, the sea level is
higher, and there is more water vapor in the atmosphere, which
energizes storms. So nothing is entirely natural anymore. The
background atmosphere has changed and continues to change
because of the changing climate.
It's important to bear in mind that when one considers
interpretation of specific severe events, it's a fallacy to
think that individual events are caused entirely by any one
thing, either human variation or human-induced climate change.
Every event is influenced by many factors. Human-induced
warming is now a factor in all climate events.
I could go on and give other examples, but I think I'll go
onto number four. Climate analyses suggest that the severe
weather and storm events are likely to become more common in
the future. Other modeling results indicate that, if the
nations continue to increase their emissions of GHG, the U.S.
ratio of daily record highs to record lows are likely to
increase by 20 to 1 by mid-century and 50 to 1 by the end of
the century.
Our analyses of projected climate changes in the Chicago
region have shown that the previously unheard of 1995-type heat
wave is likely to become commonplace by the end of the century,
occurring, at minimum, every few years. Over the coming
decades, we can expect that the hottest summer you have ever
experienced will become the norm. Severe precipitation events
will also become more commonplace.
PREPARED STATEMENT
Water vapor will continue to increase in the atmosphere,
along with the water--and large precipitation events will
continue in intensity and frequency. While we are already
seeing the climatic effects of heat-trapping gases, it is
important to recognize that the future lies largely in our
hands, while we reduce our emissions and have a future of less
warming and less severe impacts, or while we continue to
increase our emissions and have a future with more warming,
more severe weather, including the type of things we've been
seeing recently. The choice is ours.
[The statement follows:]
Prepared Statement of Dr. Donald J. Wuebbles
Thank you for the opportunity to testify today on the changing
trends in severe weather and the relationship of these trends to
ongoing changes in the Earth's climate system, and the risks and
opportunity those challenges pose for our Nation's energy and economic
security.
I am a professor and atmospheric scientist in the Department of
Atmospheric Sciences at the University of Illinois. I am an expert in
atmospheric physics and chemistry, and have authored more than 400
scientific articles in peer-reviewed journals, books, chapters of
books, and in a number of national and international assessments
related to concerns about ongoing changes in the Earth's climate and
atmospheric chemistry. I am a coordinating lead author for the next
major international Intergovernmental Panel on Climate Change (IPCC)
assessment of climate change and a member of the Executive Secretariat
and the Federal Advisory Committee that is undertaking the next U.S.
National Climate Assessment.
As the son of an Illinois farmer, I know that the impacts of severe
weather are of great concern to farmers and many other people because
of the effects on our economy and on our personal well-being. As we
will discuss, the evidence is strong that there is an increasing trend
over recent decades for severe weather, especially very heavy
precipitation events. Scientific analyses also suggest that the
likelihood for these events is likely to further increase as our
climate continues to change over this century. In today's testimony, I
will focus on four main points about severe weather events in the
United States and their relationship the changes occurring in our
climate system.
THERE ARE STRONG INDICATIONS THAT THE UNITED STATES IS SEEING MORE
EXTREME WEATHER-RELATED EVENTS IN RECENT DECADES THAN IN THE PAST
Analyses from the National Oceanic and Atmospheric Administration
(NOAA) National Climate Data Center (NCDC) indicate that 2011 has so
far been one of the most extreme weather, and most costly, years in the
history of our country. As of early June, there have roughly $32
billion in damages from severe events in 2011, the highest damage
costs-to-date for any year since 1980 when the NOAA started tracking
the major damaging events. The events they have evaluated this year
include major blizzards last January and February, the outbreak of
tornadoes in April and May, the drought and wildfires in Texas, New
Mexico, and Oklahoma during the spring and early summer, and major
flooding on the Mississippi River. However, these analyses do not
include the damages from other recent events, such as the effects of
flooding of the Missouri and other rivers in Iowa and other Midwest
States, the wildfires in Arizona and New Mexico during late June, or
the heat wave that gripped most of the Midwest, South, and Northeast
just last week.
However, 2011 is just part of the picture. Overall, there has been
an increase in some key types of extreme weather events since at least
1980. Widespread changes in temperature extremes have been observed
over the last 50 years. In particular, the number of heat waves
globally has increased, and there have been widespread increases in the
numbers of warm nights. Cold days, cold nights, and days with frost
have become rarer. Changes are also occurring in the amount, intensity,
frequency, and type of precipitation (note that these aspects of
precipitation generally exhibit large natural variability compared to
temperature, making it harder to detect trends in the observational
record thus requiring sophisticated analysis techniques). I will
highlight a few specific examples of the observed trends:
--We're now breaking twice as many heat records as cold records in
the United States (see Figure 1). If the climate weren't
changing, the number of record daily highs and lows being set
each year would be approximately even. Instead, from 1950 to
2009, we have observed a shift to twice as many daily heat
records being broken as night-time records. If we look at 2011,
so far the heat records outnumber cold records by a ratio of
2.2 to 1 (based on the NOAA NCDC datasets). Overall, we're
seeing more extreme heat and less extreme cold, as you'd expect
in a warming climate.
--Since 1957, there has been an increase in the number of
historically top 1 percent of heavy precipitation events across
the United States (see Figure 2 from the U.S. Global Change
Research Program (USGCRP), 2009), with an increase in such
events of more than 30 percent in the Midwest and by 67 percent
in the Northeast. Over the United States as a whole, there's
been a 20 percent increase in the amount of precipitation
falling in the heaviest events. More intense rainfall means an
increased likelihood of floods.
--Our ongoing analyses (by Ken Kunkel of the NOAA NCDC, one of my
students, and I) of the repeat or reoccurrence frequencies of
large precipitation storms are showing that such events are
occurring more often than in the past. For example (see Figure
3), the historical 20-year storm in the Midwest (Note.--A 20-
year storm has a 5 percent chance of occurring each year so
that the odds are that one occurs every 20 years) of roughly
4.4 inches of precipitation in a single day has now become the
12- to 13-year storm event. Similarly, our analyses are showing
that the 5-year storm in the Northeast (3.5 inches in a day)
has now become the 3-year storm event.
The pattern of precipitation change is one of increases generally
at higher northern latitudes (because as the atmosphere warms it holds
more moisture) and drying in the tropics and subtropics over land. The
wet are get wetter and the dry are get drier.
For some severe weather events, such as tornadoes, lightning, hail
and strong winds, uncertainties in the data collection make it
difficult to determine statistically significant trends.
there is clear scientific understanding that the earth's climate system
IS CHANGING AND THAT IT IS LARGELY HAPPENING BECAUSE OF HUMAN
ACTIVITIES
There is no debate within the science community, based on the peer-
reviewed literature, about the large changes occurring in the Earth's
climate or the connections of these changes to human activities,
largely the result of the burning of fossil fuels (e.g., see national
and international assessments of our climate such as USGCRP, 2009 and
IPCC, 2007). The science is clear and convincing that climate change is
happening, happening rapidly, and happening primarily because of human
activities.
There are an ever-increasing number of many independent surface
observations that give a consistent picture of a warming world. Such
multiple lines of evidence, the physical consistency among them, and
the consistency of findings among multiple, independent analyses form
the basis for the conclusion from the 2007 IPCC international climate
assessment that the ``warming of the climate system is unequivocal''.
As part of the changing climate, along with changes in the mean
temperature being seen worldwide, there is likely to be an amplified
change in extremes, both in temperature and in precipitation.
SCIENTIFIC ANALYSES ARE NOW INDICATING A STRONG LINK BETWEEN CHANGING
TRENDS IN SEVERE WEATHER EVENTS AND THE CHANGING CLIMATE
Every weather event that happens nowadays takes place in the
context of the changes in the background climate system. Globally, the
temperatures are higher, the sea level is higher, and there is more
water vapor in the atmosphere, which energizes storms. So nothing is
entirely ``natural'' anymore. The background atmosphere has changed and
continues to change because of the changing climate. It is important to
bear this in mind when one considers interpretation of specific severe
events. For example, a pure meteorological analysis of the 2011 would
events would note their consistency with the behavior from the La Nina
cold Pacific temperatures found earlier this year and the effects of
the phase of the North Atlantic Oscillation ocean-atmosphere
interactions, but would the severity of the 2011 events been as bad as
they are without the changes in the background climate system. Analyses
still need to be done to sort this out.
It's a fallacy to think that individual events are caused entirely
by any one thing, either natural variation or human-induced climate
change. Every event is influenced by many factors. Human-induced
warming is now a factor in all weather events.
We're seeing more heat waves and they are hotter and they last
longer. And while we might still have had a particular heat wave in the
absence of human-induced warming, it would not have been as hot, or
lasted as long, and such events would not occur as frequently. For
example, an analysis of the 2003 European heat wave (Stott et al.,
Nature, 2004) that killed tens of thousands of people was shown to be
about four times more likely due to human-induced warming. And in the
future, summers that hot will be commonplace, if we continue on our
current path of increasing emissions of heat-trapping gases.
The changes occurring in precipitation are also consistent with the
analyses of our changing climate. For extreme precipitation, we know
that more precipitation is falling in very heavy events. And we know
key reasons why--warmer air holds more water vapor, and so when any
given weather system moves through, all that extra water dumps out in a
heavy downpour. And in between these downpours there are longer periods
without rain. So you get this cycle of very wet and very dry
conditions. And we're seeing this happening now, just as climate
studies indicated it would.
A key ingredient in changes in character of precipitation is the
observed increase in water vapor and thus the supply of atmospheric
moisture to all storms, increasing the intensity of precipitation
events on average. Widespread increases in heavy precipitation events
and risk of flooding have been observed, even in places where total
amounts have decreased. Hence the frequency of heavy rain events has
increased in most places but so too has episodic heavy snowfall events
that are thus associated with the changing climate.
CLIMATE ANALYSES SUGGEST THAT SEVERE HEAT AND STORM EVENTS ARE LIKELY
TO BECOME MORE COMMON IN THE FUTURE
Sophisticated computer models of the global climate system are
being used to determine how severe weather is likely to change during
the course of this century. For example, in a study of record high and
low temperatures by Jerry Meehl of National Science Foundation's
National Center for Atmospheric Research, climate modeling results
indicate that if nations continue to increase their emissions of
greenhouse gases in a ``business as usual'' scenario, the United States
ratio of daily record high to record low temperatures would increase to
about 20 to 1 by mid-century and 50 to 1 by 2100. The mid-century ratio
could be much higher if emissions rose at an even greater pace, or it
could be about 8 to 1 if emissions were reduced significantly.
Our analyses (see Chicago Climate Action Plan or Wuebbles et al.,
Journal of Great Lakes Research, 2010) of projected climate changes in
the Chicago region have shown that the previously unheard of 1995 type
heat wave is likely to become commonplace by the end of the century,
occurring at minimum every few years. Over the coming decades, we can
expect that the hottest summer you have ever experienced will become
the norm.
As the climate system continues to warm, these models of the
Earth's climate system indicate severe precipitation events will also
become more commonplace. Water vapor will continue to increase in the
atmosphere along with the warming, and large precipitation events will
increase in intensity and frequency. At the same time, droughts like we
have been seeing in recent years in the Southwest will likely become
stronger and more frequent as the climate change continues. Basically,
we expect the wet to get wetter and the dry to get drier.
Some people have criticized climate models. However, today's
climate models encapsulate the great expanse of current understanding
of the physical processes involved in the climate system, their
interactions, and the performance of the climate system as a whole.
These complex numerical models account for the many feedbacks that
occur through interactions among the components of the climate system:
--the atmosphere;
--oceans;
--land; and
--cryosphere (which includes sea, lake and river ice, snow cover,
glaciers, ice caps, ice sheets, and frozen ground).
Today's climate models are extensively tested relative to
observations and are able to reproduce the key features found in the
climate of the past century, and simulations of the evolution of global
surface temperature over the past millennium are consistent with past
climate reconstructions.
However, these models are not perfect and likely can't ever be
perfect. Uncertainties arise from shortcomings in the understanding and
how to best represent complex processes in models. Nonetheless, these
models do many things well and provide the best representation possible
of the climate system and its changes.
Because models do differ in their representation of certain
processes, we make use of these differences by examining suites of
models in the climate assessments. However, it is worth noting that
they all give the same basic story--human-related activities are
significantly heating up the Earth's climate and altering its
precipitation patterns and will continue to do so over this century and
beyond unless the human effects are reduced. Also, despite the
tremendous improvements in the climate modeling capabilities over my 40
years as a scientist, the basic response of a significant effect on the
climate system from human activities continues to be about the same as
the models were finding 40-year ago. These models are the only crystal
balls we have--and although not perfect, they are very useful tools. By
downscaling approaches that account for local/regional observations,
the results from these models can and are being used to clearly
illuminate the choices we face--between a future with lower versus
higher impacts on humanity and ecosystems.
While we are already seeing the climatic effects of our emissions
of heat-trapping gases, it is important to recognize that the future
lies largely in our hands. Will we reduce our emissions, and have a
future with less warming and less severe impacts, or will we continue
to increase our emissions and have a future with more warming and more
severe impacts, including more extreme weather events? The choice is
ours.
Figure 1.--This graphic shows the ratio of record daily
highs to record daily lows observed at about 1,800 weather
stations in the 48 contiguous United States from January 1950
through September 2009. Each bar shows the proportion of record
highs (red) to record lows (blue) for each decade. The 1960s
and 1970s saw slightly more record daily lows than highs, but
in the last 30 years record highs have increasingly
predominated, with the ratio now about 2 to 1 for the 48 States
as a whole (based on Meehl et al., Geophysical Research
Letters, 2009).
Figure 2.--The map shows percent increases in the amount
falling in very heavy precipitation events (defined as the
heaviest 1 percent of all daily events) from 1958 to 2007 for
each region. There are clear trends toward more very heavy
precipitation for the Nation as a whole, and particularly in
the Northeast and Midwest. (from Global Climate Impacts in the
United States, USGCRP, 2009).
Figure 3.--Using NOAA daily precipitation data (from the
NOAA NCDC) for 497 stations in the Midwest, we have been
analyzing the returns for the Midwest in terms of a single-day
event returning in 5 years, 10 years, and 20 years (we are also
analyzing multiple-day events). The graph shows the single-year
analyses and a 10-year running mean of the 20-year storm event
in the Midwest for data starting in 1930 through 2010 (it does
not include the huge rainfalls already observed in 2011). As
would be expected, the annual signal is noisy, but much less
noisy for the 10-year running mean. This analysis suggests that
what was a 20-year precipitation event over the Midwest is
becoming more common over time and has become a 12- to 13-year
event in recent years.
Senator Durbin. Thank you very much, Dr. Wuebbles. Franklin
Nutter is president of the Reinsurance Association of America.
Please proceed.
STATEMENT OF FRANKLIN W. NUTTER, PRESIDENT, REINSURANCE
ASSOCIATION OF AMERICA
Mr. Nutter. Chairman Durbin, Ranking Member Moran, thank
you very much for this opportunity. Reinsurance is,
essentially, the insurance of insurance companies. It serves a
variety of purposes, but most relevant to this hearing, it is
the financing of risk for severe and infrequent natural and
manmade catastrophes.
We share the subcommittee's concern that an increase in
severe weather events requires a more forward-looking and
proactive approach to financing recovery from disasters. I have
attached to my statement a series of slides, like the ones you
show here, about the number and the increase in number of
events, but also the financial impact in the United States and
outside the United States of natural catastrophes.
Much of this increase can be attributed to changes in
weather intensity and climate-related impacts, but a
fundamental driver is the increase in the number of people
living in areas vulnerable to natural catastrophes, the
increase in property values, and the vulnerability of
construction materials and technology.
The reality is that our society has moved increasingly to
areas with the greatest exposure to natural catastrophes, along
our coasts and rivers, and invaded the natural landscape in
areas susceptible to wildfire and drought. The subcommittee
asked that I address how insurers prepare and evaluate this
changing risk landscape, and how that might be applied in a
public sector.
And indeed, as was mentioned by the chairman, the Federal
Government has much the same insured exposures through the NFIP
and the Federal Crop Insurance Program. But, of course, the
Federal Government has the additional responsibility for
disaster assistance.
While no one can reliably predict specific weather events,
this does not preclude financial planning for the likelihood of
these events, or through--for the reliance of--on the
scientific community to assess future conditions that can be
used to make decisions about appropriate policy.
The insurance industry believes that long-term solutions to
hazard reduction should be driven by mitigation and adaptation
strategies. Federal incentives for improved natural hazard
building codes, improved financing for mitigation and
relocation of repetitive lost properties in the NFIP, better
preservation of natural habitats that service protected areas
for property and people should all be included in the
Government's portfolio of approaches.
The insurance industry funds research in this area through
the Institute for Business and Home Safety, which recently
opened a research facility, which replicates natural hazards in
a controlled environment and assesses their impact on
commercial and residential structures.
The traditional insurance model is largely an actuarial
one. A pool of data of actual loss is trended forward, using
economic factors.
And insurers rely primarily on three interrelated
approaches for financial protection for future severe and
infrequent events, the first being actuarially driven pricing
that reflects actual risk assessment; the second being
diversification of its portfolio of insured properties,
geographically and by line of insurance.
And the third is the utilization of reinsurance to transfer
risk beyond which the insurer wishes to retain. In recent
years, the insurance industry has modified this traditional
approach to its business by assessing and pricing catastrophe
risk.
After Hurricane Andrew in 1992, it was clearly obvious that
a retrospective loss model, as I had described momentarily
above, was inadequate, and indeed, misleading for future
catastrophic events.
To address this dilemma, probabilistic models were
developed to assess a financial impact of catastrophic natural
hazards, simulating possible future events over long periods of
time, to produce a representative loss scenario.
As it has become standard practice for insurers and
reinsurers, I recommend this approach to the subcommittee and
to the Government as a means for planning for future funding
needs related to natural catastrophes. These models operate on
the following principles.
A hazard component, populated by teams of scientists,
creates a catalog of thousands of potential computer-simulated
catastrophes. I might add that most of that information,
really, is derived from Government programs and Government-
funded programs through the National Science Foundation and
through the NOAA.
The engineering component consists of detailed information
about properties exposed to these events in specific locations
or regions.
And the financial component derives information--provides
information about potential losses for individual properties,
or groups of properties, and applies a probability of loss.
PREPARED STATEMENT
These models allow users to assess the impact and severity
of future loss scenarios, analyze the effect of changes in
conditions, or propose changes in hazard mitigation, assess
adaptation scenarios, and determine the appropriate pre-funding
needs.
In the case of the insurance industry, that would apply to
the insurance premiums, in the case of Government, the pre-
funding disaster assistance needs. Mr. Chairman, we commend you
and the subcommittee for looking at this very important issue
and look forward to exploring the kind of risk management and
risk-financing techniques used in the private insurance sector
for public needs. Thank you.
[The statement follows:]
Prepared Statement of Franklin W. Nutter
I am Franklin Nutter, president of the Reinsurance Association of
America (RAA). Thank you for the opportunity to testify.
Reinsurance is essentially the insurance of insurance companies. It
serves a variety of purposes in the financial structure of insurance
companies, but perhaps the most relevant to this hearing is the
financing of risk for severe and infrequent natural and manmade
catastrophes. Reinsurers have borne significant shares of insured
losses from many major catastrophic events including 55 percent of
September 11 losses; 33 percent of Hurricanes Katrina; Rita and Wilma;
40 percent of the recent Japanese earthquake and tsunami; and 33
percent of the recent Midwest tornadoes.
We share the subcommittee's concern that an increase in severe
weather events requires a more forward-looking and proactive approach
to financing recovery from disasters. Attached to this testimony are a
series of slides showing a clear increase in the number and financial
impact of United States and non-United States natural catastrophes
including geophysical (earthquake); climatological (extreme
temperature, drought, wildfire); hydrological (flood); and
meteorological (winter and thunderstorms and related hurricanes and
tornadoes) events. Much of this increase can be attributed to changes
in weather intensity and climate-related impacts. However, the
fundamental driver is the increase in the number of people living in
areas vulnerable to catastrophic storms, the increase in property
values in these high-risk areas, and the vulnerability of construction
materials and technology. The reality is that our society has moved
increasingly to areas with the greatest exposure to natural
catastrophes along our coasts and rivers and invaded the natural
landscape in areas susceptible to wildfire and drought. Where these
areas once served as natural habitats to wildlife and buffers from
natural hazards, they are now populated with communities and
infrastructure.
The subcommittee asked that I address how insurers prepare and
evaluate this changing risk landscape and how that might be applied in
the public sector. Indeed the Federal Government has much the same
insured exposure through the National Flood Insurance Program (NFIP)--
with 5.5 million homes insured--and the Federal Crop Insurance Program
(FCIP). The Federal Government has the additional burden of disaster
assistance following catastrophic events and appears to rely primarily
on postevent appropriations. No one can reliably predict specific
weather events more than a few days in advance and there is no reliable
prediction for earthquakes. That does not preclude, however, financial
planning for the likelihood of these events or for reliance on the
scientific community to assess future conditions that can be used to
make decisions about appropriate policy matters. Support of the work of
the National Science Foundation and National Oceanographic and
Atmospheric Administration (NOAA) remain an important part of assessing
risk from natural forces. The private sector benefits immensely from
funded research programs by these institutions.
The insurance industry believes that long-term solutions to hazard
reduction should be driven by mitigation and adaptation strategies.
Federal incentives for improved natural hazard building codes, improved
financing for mitigation and relocation of repetitive loss properties
in the NFIP, better preservation of natural habitats that serve as
protective areas for property and people should all be included in the
Government's portfolio of approaches for minimizing the economic
consequences of natural disasters--many of which are ultimately borne
by U.S. taxpayers. The insurance industry also funds research to
address building features and styles that can significantly reduce
damage to property. The Institute for Building and Home Safety recently
opened a new research facility which replicates natural hazards
(hurricanes, thunderstorms, hail, wildfire) and their impact on
residential and commercial structures. Its research will lead to
improved building and community resilience.
The traditional insurance model applied to automobiles, workers'
compensation and homes as it relates to non-natural peril insurance
coverage's is largely an actuarial one: a pool of data of actual losses
trended forward using economic factors such as cost of living
adjustments and inflation. Insurers then seek to collect a premium from
an insured based on this analysis not knowing of course whether any
specific insured property would suffer damage, but predicting
reasonably well what the likely loss experience of the pool of insureds
would be over a period of time.
Insurers rely primarily on three interrelated approaches for
financial protection from severe and infrequent events:
Actuarially Driven Pricing That Reflects Actual Risk
Assessment.--Unfortunately, the NFIP reports that it subsidizes
about 25 percent of its properties, that 1 percent of the
properties account for 30 percent of the losses as repetitive
loss properties and then relies on borrowing from the U.S.
Treasury for funding shortfalls. The Program is $18 billion in
debt to the Treasury at this time.
Diversification.--Variation of the portfolio of insured
properties geographically and by line of insurance.
Utilization of Reinsurance To Transfer Risk Beyond What the
Insurer Wishes To Retain.--NFIP legislation recently passed by
the House authorizes the NFIP to purchase reinsurance rather
than rely exclusively on Federal debt. The FCIP is already a
public private partnership.
Given the enormous recent losses of property and people to natural
events, the insurance industry in recent years has modified its
approach to assessing and pricing catastrophe risk. After Hurricane
Andrew in 1992, it was clearly obvious that a retrospective loss
business model as described above was inadequate, and indeed,
misleading for catastrophic events, particularly if a changing pattern
of weather and climate were developing. Assessing risk by applying
historical loss events over current insured properties leads to an
underestimation of potential losses. To address this dilemma,
probabilistic models were developed to assess the financial impact of
catastrophic natural hazards simulating possible future events over
long periods of time to produce a representative loss scenario. As it
has become standard practice for insurers and reinsurers, I recommend
this approach to the subcommittee as a means to plan for future funding
needs related to natural catastrophes.
These catastrophe models are provided to subscribers by several
firms whom I have identified in the appendix and in some cases by
reinsurers and reinsurance brokers. The models operate on the following
principles:
--The hazard component, populated by teams of scientists
(meteorologists, seismologists, geophysicists, and
hydrologists) creates a catalog of thousands of potential
computer simulated catastrophes and applies the intensity of an
event at specific locations.
--The engineering component consists of detailed information about
the properties exposed to these events in specific locations or
regions (including location data and building characteristics).
--The financial component provides information about potential losses
for individual properties or groups of properties and applies a
probability of loss.
These models allow users to assess the impact and severity of
future loss scenarios, analyze the effects of changes in conditions or
proposed changes in hazard mitigation (e.g. building codes, structural
changes to properties), assess adaptation scenarios and determine the
appropriate pre-funding needs. In the latter case that would apply to
insurance premiums, or in the case of the Government, to pre-funding
disaster assistance needs. These models are routinely updated to
reflect new scientific or local infrastructure and building
information. Some of these models have been applied to pandemics,
terrorism-related events and climate change as well.
Mr. Chairman, on behalf of the RAA, we look forward to exploring
the risk management and financing techniques currently in practice in
the reinsurance industry to determine how the Government can improve
its financial planning needs related to manmade and natural
catastrophes.
Senator Durbin. Thank you very much. I know Senator Moran
has to go to another meeting, but I thank you for attending
today. If we have any written questions, we will submit them to
be entertained by the panel here. Mr. Nutter, I think you sent
us this chart here. I'm taking a look at it, Top 16 Most Costly
World Insurance Losses. Is that your chart----
Mr. Nutter. Yes, I have----
Senator Durbin. For the insurance?
Mr. Nutter. I have several. Let me make sure I have the one
that you're----
Senator Durbin. Insurance Information Institute? I don't
think we have that in large font, do we?
Mr. Nutter. I have that here with me.
Senator Durbin. Do you? Well, this chart, as it is titled,
Top 16 Most Costly World Insurance Losses, 1970 to 2011--so
that's a 41-year period of time. And it says two noteworthy
things. Taken as a single event, the spring 2011 tornado season
would likely become the ninth costliest event in global
insurance history. (50:26 of webcast)
Sources.--Swiss Re sigma 1/2011; AIR Worldwide, RMS, Eqecat; Insurance
Information Institute.
And then it says 3 of the top 15 most expensive
catastrophes in the history of the world have occurred in the
past 18 months. So let me ask you this question, and then I
think I know the answer, but I want it on the record. Do you
adjust these dollar losses to inflation?
Mr. Nutter. These all reflect 2011 dollars. They've been
adjusted so that they can be reconciled with each other.
Senator Durbin. So we just can't argue that things are more
expensive now than they were 20 years ago, and a small event
today may cost a lot more money than it did 20 years ago?
Mr. Nutter. That's correct.
Senator Durbin. These have been adjusted accordingly?
Mr. Nutter. That's correct.
Senator Durbin. So, then, this is noteworthy. And let me
ask you, what is the impact of this kind of information on your
industry, when the people are trying to decide whether they'll
write insurance, and if they do, what kind of reserve they
need, what kind of premiums they charge?
Mr. Nutter. Well, Mr. Chairman, as you mentioned in your
opening comments, obviously, the insurance industry looks at
historical losses and determines whether or not the premiums
that it's charging reflect the risk that it's assessing.
But in this area of natural catastrophe, the industry has
tried to do a better job in assessing the probability of future
events, and adjusted, you know, these premiums accordingly.
So, in some cases, insurance companies have looked at their
exposures, what they've written in high-risk areas. Think
coastal areas, the State of Florida, the east coast, the gulf
coast.
And some insurance companies have pulled back from those
areas because they feel like that--what they should charge,
related to the risk of exposure, they can't, or that the
regulatory system inhibits them, so that they pull back. They
decline coverage or they nonrenew coverage.
On the other hand, in our community, the reinsurance
community looks to right catastrophe risk, largely because it
does not have regulated premiums, but in fact, operates at a
very competitive environment not unlike the insurance industry
in the State of Illinois operates in a competitive rate
environment. So in our sector, catastrophe risk is somewhat
counterintuitive. In fact, they look to right this risk,
believing that they can assess it.
Senator Durbin. So let me ask you, from an actuarial or a
statistical point of view, how do they factor in whether
something is an aberration, a once-in-a-100-year event, or a
pattern emerging?
Mr. Nutter. Yes, it really is a probabilistic analysis.
It's a stochastic analysis, if you will, trying to assess
whether or not these events are, indeed, outliers.
I think what we would say is that the outliers have become
commonplace, not unlike Dr. Wuebbles said that your--you know,
the hottest day you've experienced will become the norm going
forward, that the insurance industry looks at these losses as
being common, largely because of the movement of people into
these high-risk areas.
If you looked at the development, as well as population
shifts to coastal areas in particular, it's pretty notable. So
we don't--I don't think the industry sees these as outliers,
any one event, but in fact, a pattern that's going to continue
and continue to grow going forward.
Senator Durbin. So you see the weather pattern and also the
residential or settlement pattern coming together?
Mr. Nutter. Absolutely, in the wrong way.
Senator Durbin. Magnifying these losses in the wrong way.
Let me, if I can, turn to Mr. Rivera, because, following what
Mr. Nutter has just said, it's very clear that they're looking
beyond any fiscal year to a pattern that would lead them to
decide whether to write insurance, and if so, what reserves are
necessary to protect their risk.
You discussed the advanced modeling that you're using for
budget projections for the Federal Government. You have one
small, but important, part here, SBA disaster loans. And you
used, as I understand it, these budget projections, for short-
term estimates only--seasonal and annual. So what, if anything,
are you doing to look to the long term?
Mr. Rivera. Thank you, Senator. You know, as I'm listening
to Mr. Nutter here, he's talking about his actuarial approach,
pricing risk, diversification, and reinsurance. We pick up some
of those components.
We do look at historical data that takes in the recent
weather patterns. We look at the long-term costs, and we do the
annual assessment based on the Federal Credit Reform Act, since
1990, and moving forward.
But the thing that I find very interesting is, in the
Federal Government, or at least with the Disaster Loan Program,
the SBA is not able to price risk as the private sector is. So
for example, a disaster applicant comes to me and whether
they're insured or uninsured, or underinsured, we go ahead and
provide that loan to them from that perspective.
We're open and interested in trying to figure out if we can
make a connection between what the private sector is doing and
what we're doing in the Federal Government. I mean, that makes
a lot of sense.
But the different perspective of us not being able to price
our product, for example, the maximum interest rate for a
homeowner loan can be no more than 4 percent by statute. So
we're a little bit more boxed in from that perspective.
Senator Durbin. So let's follow up on that, Mr. Trimble. It
seems to me that, as I try to take Mr. Nutter's good advice
about what the private sector is doing and apply it to the
Federal Government, in our exposure to weather events, Mr.
Rivera has just identified a problem. The people setting the
premiums, interest payments, and such, happen to be Members of
Congress and the President, who enact laws.
So as we try to envision a more challenging world, in terms
of risk exposure, has the GAO taken a look at whether or not we
are adjusting our economic models and projections, in terms of
premiums collected, monies set aside, or are we just going to
rely on disaster payments if we get into a fix?
Mr. Trimble. Well, we looked, as part of a study a couple
years ago, at two Federal insurance programs, the crop
insurance and the flood insurance programs. And what we found
was similar.
Their perspective was budgeting by year, based on past
losses. But at that time, the point was also made that those
programs operate under different constraints and imperatives,
based on their statutory requirements.
So we've not done a full examination of the constraints of
those statutory requirements, in terms of how they operate day-
to-day. I think the question is, what latitude they have to
incorporate climate change under the existing requirements
they're under.
Senator Durbin. Dr. Sullivan, I suspect that some of the
information that Mr. Nutter and his industry uses comes from
your agency, in terms of what you are observing and the changes
that are taking place.
And you've made a good point about how you need to continue
to have the technology, keep up with the science, so that you
can avoid exposure for loss of life and dollar cost that might
be associated with it. So are you--as you look at these
projections from the NOAA's point of view, seeing these severe
weather trends emerging and growing in the future?
Dr. Sullivan. Senator, we're not assuming in our analyses,
that the patterns, specifically that we see in past data, will
remain the patterns that future data will show. Mr. Nutter's
testimony alluded to this. Excuse me, Dr. Wuebbles's testimony
alluded to this.
The 50-year flood is now the 20-year flood, is now the 12-
year flood. So analytical methods that our NCDC personnel use
in concert, in partnership with a variety of academic partners,
such as Dr. Wuebbles, test and examine repeatedly, almost
continually, in fact, those trends, those patterns, and try to
arrive at some statistical confidence about what slant, what
trend should be incorporated in forward projections so that we
have what are called nonstationary statistics.
I'd also comment, if I may amplify a bit on what I
mentioned about the IWRSSI effort that we're doing with the
Corps of Engineers and the USGS. We're working there to make
all of our data systems, from maps to stream flow data and
everything in between, fully interoperable and fused on a
common platform, common portal.
And that will allow Federal partners, who try to support
regional, local, and State officials in flood-prone areas do
the things that Mr. Nutter was talking about, not just give you
a forecast for a point on a river at a certain point in time,
but actually let you interactively translate that into specific
inundation levels that may be expected at your Main Street
bridge in your neighborhood, and lay that against the Census,
and other demographic and economic data to readily give you an
economic outlook for the possible damage that you may be seeing
if the flood really reaches the stage that's been forecast.
Senator Durbin. Dr. Wuebbles, I've had the good fortune of
meeting a lot of Illinois farmers, which is your family
background. They are courteous and thoughtful people who come
to visit me and consider an important part of their
responsibility to help educate a Senator about agriculture and
the world that they live in, in Illinois or around the Nation.
And for a period of time there, I'd asked each group of
farmers from Illinois, who came in to see me, the same
question. I asked them how many of you believe that man's
activity on Earth is changing the climate that we live with? Is
it changing the weather patterns, or the temperatures, the
world that we live with?
And I would say, out of, perhaps, 100 farmers, 2 said yes.
And I would, then, pursue with them, do you believe that things
are changing in this world? Are glaciers melting? Do you see
changes in the weather patterns? And if so, how do you explain
it? If it isn't our activity adding to this, what's causing it?
And they would kind of be very quiet. I had to probe, come
on now, give me an answer. And you know, one farmer said to me,
from Illinois--he said, Senator, 8 years ago, I had a flood.
Last year, I had a drought. God's going to throw different
things at me from time to time. It's kind of this divine mood
swing that they really view as behind this.
So I'd like to say to you that I'm not going to try to
resolve that political environmental question here. But I think
what we try to do in this hearing is to acknowledge what is
objective and obvious. Something's changing. I don't know the
reason. I mean, I think I happen to agree with you what the
reason is.
But whether or not you agree with your premise, or mine, or
someone else's, the facts are the facts. Things are changing in
weather patterns here. I guess the only thing that I know with
any degree of certainty is what it's like to make 48 round
trips between Illinois and Washington a year for 29 years.
I've spent a lot of time in airplanes, and I'll tell you,
the weather is a mess this year, and I've never seen it this
bad. And it continues to be bad, way beyond the spring storms
that we're used to. The point I'd like to get to is whether or
not we can come to some consensus here, beyond the political
debate about climate change, about the reality of what we face.
Within the academic community, where there might be a
difference of opinion about man's impact on the environment, is
there at least a common conclusion that things are changing in
a patterned way?
Dr. Wuebbles. Basically, yes, I think you'd find very
strong consensus that a--what's occurring in the long-term
averages of weather, in the statistics of weather, are
changing. You know, there's no question about that.
You know, more than 90 percent of the glaciers in the world
are decreasing significantly. And there's--I've talked today
about precipitation events, you know. The data itself is very,
very strong that things are changing.
I think, if you had asked the farmers a different question,
if you'd asked them, are you seeing changes occurring in what
you're doing in your fields and in trying to get out there each
year, I think you would have gotten a little bit different
answer, that you--they definitely are seeing more, in the
Midwest, in Illinois, more situations of flooding, strong
precipitation in the spring, can't get out into their fields as
soon.
And so I think you would have seen that, yes, they
definitely have--they know that something's happening. And it's
not just what it was 30, 40 years ago.
It's--if we turn back to the science community, you know,
that's very clear, that, as I said in my testimony, if you go
and look at the peer-reviewed literature, which is how we--you
know, scientists judge ourselves by publishing papers and
having our peers look, examine those papers, before they can be
published.
And so it's our way of trying to put in checks and balances
of it in what we do. You don't find a disagreement about the
fact that humans are having an impact on our climate system.
It's just not there. And very, very few papers make it in at
all. And those that do usually are shot down pretty rapidly
because they've made mistakes in the evaluation of the data, so
I think the evidence is quite strong that, you know, it's
unequivocal that our climate is changing, and that there is a
strong relationship to what's--what human activities are doing.
Senator Durbin. So let me try to draw all of you into this
common question. Going back to Mr. Nutter's premise, I assume
that, if you guess wrong in the insurance business, it's going
to affect the bottom line, whether or not you're profitable,
whether you've collected enough premiums and set aside enough
reserves. And so we do things a little differently in
Washington.
If we guess wrong, in terms of a program that is supposed
to protect people from a disaster, let's say crop insurance, if
we guess wrong, we have something called a supplemental
appropriation, which means we make up the difference with a
disaster payment.
And they frequently are coming through the Congress for
everything you can imagine, from earthquakes in California to,
you name it, droughts, and fires, and all the rest. So we move
in with the supplemental appropriations, which are
unpredictable, and usually just go directly to the deficit,
with very, very few exceptions.
Now, I served on the Deficit Commission, the Bowles-Simpson
Deficit Commission, that the President created. And they
decided to try to do something about that. And I'm going to ask
you all to think about this, that have not heard it before, and
react to whether or not you think this is constructive, is
complete, or how you might modify it. The Fiscal Commission
emphasized that restoring fiscal discipline requires honest
budgeting.
And a given disaster may, itself, be unpredictable, but the
need to pay for some level of disaster relief is not. Federal
budgets rarely set aside adequate resources in anticipation of
disasters, and instead, rely on emergency supplemental funding
requests.
With that premise, the Commission plan explicitly called
for setting aside funds for disaster relief and establishing
stricter parameters for their use. The disaster fund budget
authority would be limited to the rolling--this is the
operative sentence--average of disaster spending in the most
recent 10 years, excluding the highest and lowest years.
Any unused budget authority would be rolled forward to
increase the disaster fund budget authority available the
following year. Any spending above the disaster fund limit
would need to be offset with reductions in spending in other
areas or special parliamentary procedures.
So, if you can follow the premise, it's pretty basic. You
can, without a statistics course, I think, understand it. Take
the last 10 years. Throw out the highest and the lowest year.
Average it. And we're going to make sure we have at least that
amount of money available each year.
If we don't spend it all, we'll roll it over to the next
year. Now, apply that model to what you've seen in the last 10
or 20 years, or what you see coming, and tell me whether or not
you think that's adequate. What do you think, Mr. Nutter?
Mr. Nutter. I would start, and I think the insurance
industry learned a lesson some time ago, that 's not an
adequate way to do that.
Senator Durbin. Not adequate?
Mr. Nutter. Not an adequate way to do that. That as I said
in the testimony, when prior to Hurricane Andrew, which is
1992, the industry had an estimate, that the potential losses
of a hurricane in that area would be about $8 billion. That was
the number.
It turned out to be $25 billion when it actually occurred.
And it really was a change in the thinking of the industry,
that you can't just presume that the past is prologue. You
can't take past events, and overlay it on current
infrastructure and inventory of homes, and presume that 's
what's going to happen.
So these probabilistic models that developed, really, were
an effort to try and look at the probability of much more
extreme future events. And let me take two of the programs you
mentioned--have been mentioned here repeatedly, the NFIP. It
effectively does use an average annual loss scenario for its
pricing. And it does have some statutory limitations and caps.
The House of Representatives, just in the last month,
reauthorized the NFIP and included in there a provision that
the program was authorized to go to the private reinsurance
sector and assess the reinsurance sector's capacity and
pricing. We have encouraged the Senate, when it considers the
Banking Committee, considers the flood program to do the same
thing because it does bring in that kind of private sector risk
assessment scenario that we think would, in fact, change the
thinking about what you presume.
The NFIP is $18 billion in debt, not counting the 2011
storms or whatever borrowing it might have. The debt is to the
Treasury. It's a postevent funding scenario, as you have said.
The insurance industry can't do that.
So the industry relies on a pre-event funding scenario,
where it assesses risk and tries to price for it. We really
think, by introducing private sector risk assessment principles
in programs like the NFIP, would change that mindset, that the
assumption that's made in the report, valuable as it may be, in
fact, probably understates, and underestimates, and is really
misleading about what the costs are likely to be.
One more quick comment, the Crop Insurance program is
actually a public-private partnership. You have private
insurance companies and the Federal Government with both a
risk-bearing role. And in fact, I read a report the other day
that said the Federal Government's actually made money in the
Federal Crop Insurance Program because of that kind of
involvement with the private sector.
Senator Durbin. It would seem to me that what you're
suggesting is that we are understating the premiums necessary
to cover the risk, which is probably a great political decision
on our part, but not a very good actuarial decision in terms of
what we need to pay out. Is that fair?
Mr. Nutter. Fair comment. I understand the political
problem of asking people to pay more for their insurance, but
you're either asking the people who have the risk, who have the
homes and properties in these areas, to pay a risk-based
premium, which is what the insurance companies would do, or
you're asking the taxpayers to, effectively, subsidize those
decisions by issuing debt after the fact.
Senator Durbin. Mr. Rivera, what would it mean if we
followed the private sector model and, as Mr. Nutter has
questioned, whether or not we can do the past-as-prologue
premise?
Mr. Rivera. Chairman Durbin, looking at the chart over
there. And the SBA chart, if I can just point to it for just a
minute, the red bars are the supplementals that we've had and
the green bars is our lending authority. So if you look at it,
there have been four big spikes. There was one in 1994, we had
the Northridge earthquake. I think that's the third.
Senator Durbin. Yes.
Mr. Rivera. And then we had, in 2005, Hurricanes Katrina,
Rita, and Wilma. That's the big one in the middle. We had the
two, the four Florida hurricanes in 2004, and then Gustav and
Ike in 2008, the 2008 gulf coast hurricanes. So if you look
over the last--I think that's, since 1992--18, 19 years?
Senator Durbin. Yes.
Mr. Rivera. We've really only needed a supplemental in
those four cases. So the methodology that you mentioned is
really what we really do. We look back over the last 10 years.
We knock out the big year, which is Katrina in this case.
That's the $11 billion year we had. And we average $1 billion a
year.
And we have no-year funds, fortunately for us. We're able
to carry over funds from year to year. So in the event that
there is a need above the normal appropriations of $1 billion,
we're able to use it from year to year.
So the theory, as far as, we should look forward, it's a
little bit different statutorily, because we use the Credit
Reform Act and we have to go off of historical data. But in
this case, out of, you know, 19 years, there's been four major
supplementals.
I'm not going to sit here and argue that we should stick
with our current process because we're willing and would look
at the opportunity to meet with the insurance company or the
reinsurers. The parameters that we have from a statutory
perspective, I think makes the model pretty successful. Now, I
hope I don't jinx myself, that we don't have a tropical storm
right now.
Senator Durbin. I hope we don't.
Mr. Rivera. I think from that perspective, that's the
approach that we've been taking.
Senator Durbin. So Mr. Trimble, I'd like your reaction to
this Deficit Commission, a 10-year look back. Now, are we stuck
with that because of the way we do business in Government, as
opposed to the way Mr. Nutter deals with the insurance
industry?
Mr. Trimble. We have not looked at or considered that
proposal, to my knowledge, I would point to the statement in my
testimony regarding what the National Research Council pointed
out, and what we said here, which was, past is not prologue.
Past models aren't necessarily great predictors. I think
you'd really have to go into the basics of the statutes these
guys are operating under and then look at the models. You may
be able to go historical for a while, but the question becomes
how long does your luck hold out?
Senator Durbin. Mr. Rivera, the SBA Disaster Loan Program
has provided close to $50 billion in loans since it began in
1953. In contrast to the private sector insurers, SBA cannot
charge borrowers more or less to price relative risk, based on
exposure to natural disasters.
In fact, the SBA disaster loans help borrowers recover
losses that the private sector insurance does not cover. As
private sector insurers decline to issue policies in risky
areas, due to exposure to erratic weather patterns, will more
and more of the financial burden shift to the Government?
Mr. Rivera. Chairman Durbin, we do assume the risk. I mean,
that's part of the program, as we continue to get individuals
that are underinsured or uninsured.
Once we do make the loan, we do require insurance. And
there's a limit on a ``like kind'' event. We will not provide
any additional insurance for like-kind disasters moving
forward, so we try to protect ourselves, from that perspective.
Senator Durbin. Well, let me go to Mr. Nutter. There was
a--correct me if I'm wrong here--conscious decision made by
some insurers not to insure in Florida after certain hurricane
experiences. Is what I just said accurate?
Mr. Nutter. It's--it's probably an overly broad statement.
I think some insurers pulled back from the immediate coastal
areas in Florida, as they did in coastal areas in the gulf
coast.
Senator Durbin. And so they made a decision, obviously,
based on their loss experience, that they couldn't write a
reliable policy, profitable policy, with any degree of
certainty in that area. So do we--I know the answer, but I'm
going to ask you anyway--follow that kind of decisionmaking
when it comes to our exposure for the Federal Government?
Mr. Nutter. Chairman Durbin, we--we provide disaster
assistance to all disaster victims, as long as they have
repayment ability and are credit worthy. We don't--we do not,
not make a loan just because the individual does not have
insurance or doesn't have--what we've discovered in Florida is
that, after the--the 1992 and the--and the 1994 hurricane
season, is it--the hazard insurance policy that used to protect
hurricanes--I mean, homeowners from windstorm insurance--
they've peeled that off, and now--now, they add that on as a
rider.
So the insurance company has continued to minimize their
risk by separating certain aspects of a policy. We find that
all over the gulf coast.
Senator Durbin. Let me talk about the gulf for a moment.
Dr. Sullivan, in your testimony, you mentioned that runoff from
severe chronic flooding in the Midwest will lead to hypoxic
dead zones in the Gulf of Mexico. And you stated, the Gulf of
Mexico dead zone is a particular concern because it threatens
valuable commercial and recreational gulf fisheries, that
generate about $2.8 billion annually.
So what is the size of this dead zone in the Gulf of
Mexico, compared to that? Let me see if I can point to this
here. And perhaps, you can identify this a little better than I
can. Is the bright blue area the dead zone that we're talking
about here?
DEPICTION OF GULF OF MEXICO HYPOXIA ZONE IMAGE
Source.--NOAA.
Dr. Sullivan. Yes, Senator, the red and orange areas are
the longshore coastal flow. Those regions also are most
depleted in oxygen, so they also are dead. And the blue zone is
depleted, to varying different levels, so sort of a contour of
oxygen depletion in the waters.
Senator Durbin. And it's not altogether clear in this
photograph, but we're looking at the continental United States,
with the Gulf of Mexico in the bright area down to the right
there. And what I see is the flow of the Mississippi River, and
all its tributaries into the Gulf of Mexico, and all of those
chemicals we pay so much for in Illinois, coming down that
river into the Gulf of Mexico. So what is the size of the dead
zone that we're talking about here, compared to the 2010 BP oil
spill?
Dr. Sullivan. Senator, an estimate was just released--a
forecast was just released, a couple weeks ago by the NOAA and
our partners down in Louisiana that the dead zone this year
will be between 8,500 and 9,400 square miles. Put that in
perspective. That's about the size of New Hampshire, slightly
larger than New Jersey. There are crews underway right now that
are making those measurements.
So I think, in a few weeks, we'll have an update to that
figure. The Deepwater Horizon spill, in comparison, was 29,000
to 31,000 square miles, closer to the size of South Carolina.
So this is forecast to be one of the largest, if I may, dead
zones produced by the watershed drainage and runoff, that we've
seen in many years, coming in, according to the forecast,
between 8,500 and 9,400 square miles.
Senator Durbin. So for the record, what is a dead zone?
Dr. Sullivan. A dead zone is an area where a bulge of
freshwater, such as comes down the Mississippi River, plus the
sediments and other chemicals that are in that water, cause a
blossoming of algae that consumes all the oxygen in the water.
That burst deprives the oxygen other animals in the marine
environment require that they need to grow.
Senator Durbin. And so there's little or no marine life in
this area?
Dr. Sullivan. Becomes what's called hypoxic. Marine life
that's mobile will flee, and they'll sense the oxygen gradient,
and go somewhere where they can still breathe, if you will.
Facile or attached marine life from bottom-dwelling creatures
to plants--plant species that grow along the shores, corals--
they're stuck and they will suffer a degradation, as the oxygen
is removed from the water.
Senator Durbin. Heavy rain in the Midwest, water flowing
down through the rivers, flooding that it causes on the way
down, the damage----
Dr. Sullivan. Yes.
Senator Durbin [continuing]. Ultimately ending up in the
Gulf of Mexico, creating a dead zone area that is about one-
third, if I was trying to calculate quickly, one-third of the
area affected by the BP oil spill.
Dr. Sullivan. Roughly one-third.
Senator Durbin. All right. So how long will these effects
last in this dead zone?
Dr. Sullivan. It's hard to predict how long they will last,
Senator. It depends on further rainfall. Tropical Storm Dawn,
which is moving across the western Gulf of Mexico now--
forecasts bring 5 to possibly 7 inches of rain as it goes
ashore, and then later tomorrow.
That water and the winds associated with the storm may help
mix the waters and disperse this bulge of freshwater and the
chemicals more efficiently. So certainly, factors enter in, but
it's normally, at least months and some of it endures year-to-
year.
Senator Durbin. It's not my part of the world, but I assume
this has an impact on the gulf economy?
Dr. Sullivan. It would have a tremendous impact, affecting
the coastal habitat that supports the oyster fisheries, nursery
grounds for many other commercial fish species that are fished
in the gulf, the shrimp fishery.
Senator Durbin. Dr. Wuebbles and Dr. Sullivan, both of your
testimonies point to the fact that there's a projected rise in
sea levels. And that will have a dramatic impact on risk in
many communities. Mr. Trimble has talked about adaptation as a
result.
Dr. Sullivan, you point to the effect this will have on
East Coast communities during El Nino years. And Professor
Wuebbles, you state that, globally, the temperatures are
higher. The sea level is higher.
There's more water vapor in the atmosphere, which energizes
storms. So what are some of the specific dangers that could
occur because of these changing weather patterns and this
rising higher sea level, Dr. Wuebbles?
Dr. Wuebbles. Well, the--the best analysis right now are--
are indicating that, if we continue the pathway we're going
without making, you know, extensive decreases in the emissions
of these, you know, heat-trapping gases that are affecting our
climate system, that by the end of this century, we may see in
the order of a--of a meter, and possibly even more, increase in
sea level.
Now, it isn't just the increase in sea level that gets you.
It's the storm surges. So when you have a--a large storm or a
hurricane, you get even more damage because of, you know, that
large amount of water that's there. So that itself is a big
concern. In addition, we can expect that the amount of, you
know we've been seeing an increase in severe precipitation
events.
We can, I think, further expect that we're going to see
more such events. Basically, the parts of the country where--
which tend to be wet are likely to be wetter. The parts of the
country that tend to be dry are likely to be dryer. So we're
going to see an increase both in droughts and in floods that
are likely to be important to us all.
Senator Durbin. Mr. Nutter, do you buy that?
Mr. Nutter. Yes, the industry is very concerned about storm
surge. I would have said the same thing that Dr. Wuebbles did,
that the--we've increasingly built properties in very
attractive coastal areas, often with not a sufficient setback,
certainly probably in the current environment.
But if you have an increasing sea level rise and you have
storms, you're going to have more water pushed on shore and
more storm surge-related property damage.
Senator Durbin. And is that why, the insurance industry is
pulling back from some of these coastal areas?
Mr. Nutter. It is. It is why a number of insurers have
pulled back or sought much higher insurance premiums for
properties in those areas, absolutely.
Senator Durbin. So Dr. Sullivan, can you help us out here?
As you project forecasting capabilities, is there any way that
we can reduce this projected problem and the economic impact of
these catastrophes?
Dr. Sullivan. Well, Senator, certainly, if nations around
the world choose to take GHG mitigation actions and reduce
those emissions, that would certainly lower the projected trend
from that cause. This is a problem that's already affecting
certain coastal communities. New York has planning underway.
The city of Norfolk, with--where I will visit in a couple
of weeks, has been experiencing more frequent local inundation.
And the Navy there is even looking at the prospect of needing
to elevate their piers to accommodate the changing shoreline.
So there are some signs there's sea level rise induced by
continuous and secular change in climate, plus the potential
that further warming of the planet and associated changes alter
the large-scale circulation in our major ocean basins.
There was a 2-foot sea level anomaly in some portions of
the U.S. east coast, including Chesapeake Bay, back in 2009,
that was due principally to natural variations in a North
Atlantic oscillation and effects that this had on the gulf
stream and longshore currents.
So we live in a very dynamic environment. We are citing
tremendously expensive infrastructure, highly built cities,
dense populations, preferentially in these coastal zones. There
are certainly things we can do to make our coastal communities
more resilient. The NOAA has developed a tool called the
Coastal Resilience Index, intended to help local planners.
It's a simple, several-hour question and answer exercise
that planners can use to bring key community stakeholders
together, and take stock of where they have key
vulnerabilities, key gaps in their preparedness, and look to
take immediate and near-term actions to remedy those.
Senator Durbin. Does anyone have anything they'd like to
add that we haven't touched on here, that you think might be
important or relevant, Dr. Wuebbles?
Dr. Wuebbles. It's just one minor thing, that--an important
but minor thing for--for this. As we look at--at the
projections of climate, and we recognize that the--the oceans
have a large heat capacity. So they respond much more slowly
than the rest of the atmosphere.
The real response from these emissions occur 20 to 30 years
after the initial emissions. So we're seeing the effect right
now of the emissions we made 20 or 30 years ago. The emissions
since then have continued to increase, so we can expect larger
impacts in--over the coming decades just because of that
impact, effect, that--that the oceans are going to take a much
longer time to respond. That--that's one of the reasons for
urgency in considering doing something.
Senator Durbin. Thanks. I said to my staff, I want to hold
this hearing. I want to figure out how we can talk about this
issue because nobody else is talking about it. We stopped
talking about this on Capitol Hill.
We decided that the debate over global warming was too
contentious, too politically charged, and too divided for us to
have any meaningful conversation about what to do with it. And
so we stepped away from it. I think it's a big mistake.
I think that we are overlooking the obvious. Dramatic
things are happening. They are things that are affecting lives,
and fortunes, and are going to affect us, and the way we live,
and the way we govern.
I don't think we have really measured, adequately, the
impact of our exposure at the Government level to the things
that are happening in weather pattern change, nor the exposure
of our economy to what's going to happen as these unfold. And
that is unfortunate.
And I'm hoping that, at least on our watch on the
subcommittee, that we have raised an issue which is not being
discussed very frequently on Capitol Hill. And I think we need
to step back and ask honest questions about whether we are
portraying our risk and our exposure as taxpayers and as a
Government against what may likely occur in the near future.
And I will just say, confessing my bias if I have any, and
I probably have plenty, I happen to believe that Dr. Wuebbles's
approach to this is a sensible one, that small changes in our
lifestyles today can make a dramatic difference in our future.
And if we ignore them and say let the next generation take
care of it, then the last point you made is an obvious one.
Their problems are going to go on much longer and much worse
than what we've seen.
ADDITIONAL COMMITTEE QUESTIONS
Now, on that happy note, I thank you all for coming. And we
will probably send some written questions your way. I hope
you'll have a chance to respond in a timely fashion. The record
will remain open until next Thursday, August 4, at 12 noon--I
hope we are gone by then--for subcommittee members to submit
statements and other materials.
I greatly appreciated all five of you for taking the time
in getting us such valuable testimony.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Richard J. Durbin
Questions Submitted to Kathryn D. Sullivan, Ph.D.
Question. Dr. Sullivan, in both your written statement and verbal
testimony, you addressed the importance of computer modeling and
forecasting for the United States to be prepared for severe weather
events in the long-term.
Given the importance of accurate models to proper budgetary
planning, what key enhancements do you think could be made to improve
these models?
Answer. As mentioned in my testimony, our Nation's environmental
predictive capabilities are supported by four foundational pillars:
--observations;
--computer models;
--research; and
--our people.
The computer models pillar includes the entire computer-based
forecast system--which is composed of forecast model software, data
assimilation software for initializing the model, and a supercomputer
to carry out the calculations. An accurate forecast requires both
initial information on the state of the atmosphere, and an accurate
physical depiction of the evolution of the atmosphere during the
forecast. The President's fiscal year 2012 request invests in high-
performance supercomputing for the National Weather Service (NWS),
sustaining the rate of improvement in our numerical weather prediction
modeling capability that is key to our plans to take advantage of
improved observations.
The following key enhancements are critical to improve the models:
Advanced Data Assimilation.--An analysis is a process resulting
in an accurate image of the atmosphere at a given time,
represented in a model as a collection of numbers--and data
assimilation is an analysis technique in which the observed
information is accumulated into the model state. Probably the
most important of the enhancements overall, advanced data
assimilation techniques are needed to provide more accurate
initial conditions using information from observations. New
techniques are being developed to extract more usable
information from all available observations. These are
undergoing testing, and should be operational in 1-2 years.
Model Physics.--The forecast model contains representations of
clouds, precipitation, the daily sunlight radiation cycle,
evaporation and heating from the Earth's surface, and more. In
nature, each of these elements of physics plays a major role in
determining the evolving weather. Generally, the more accurate
they are represented in the forecast model, the more accurate
the forecast.
Use of Ensemble-based Forecast Systems.--Making multiple model
forecasts with slightly different initial conditions, or with
other slight alterations, gives us the ability to make
definitive statements about our confidence in the operational
forecast. These statements of confidence can be very important
to decisionmakers, especially when major events are predicted.
For example, if multiple runs of one or more models show strong
agreement on the path of a hurricane or the development of a
major storm, we can place a high confidence in the forecast and
resulting impacts for that event. The higher our confidence
level in the forecast, the more likely appropriate action will
be taken in advance.
Model Resolution.--Representing the detailed evolution of the
atmosphere depends on the resolution of the forecast model.
Following this paragraph are two figures with 12 km and 4 km
representations of the topography over Puget Sound, Washington.
Clearly, the one with 4 km resolution contains more detail.
Experience has shown that forecast models with higher
resolution will give more detail and greater accuracy. The 4 km
forecast uses 27 times more computer resources than the 12 km
forecast, which is why computer power is critical for weather
forecasting models used in operational forecasts. Model
resolution is particularly important for major weather events
such as hurricanes, severe spring and summer convective storms
and winter snow and ice storms.
12 km
4 km
Improved Observation Network and Observation Use.--Increased
information from observations, through the data assimilation
process, results in more accurate initial conditions. Critical
observations include those from current and future weather
satellites (the Joint Polar Satellite System (JPSS), the GOES-R
Program), commercial aircraft, Dual Polarization Radar, and
advanced technology sensors for measuring temperature and
moisture in the lowest 3,000 ft of the atmosphere. Research,
leading to operational implementation of new, cost-effective
observing systems, is also necessary for progress in this area.
Again, our Nation's environmental predictive capabilities are
supported by four foundational pillars:
--observations;
--computer models;
--research; and
--our people.
These pillars are completely interdependent, and should be enhanced
in a balanced way in order to promote a strong and vibrant foundation
for improvements. For example, investments in supercomputing capability
strengthen and enhance all four pillars in an integrated way, as all
benefit from the advanced guidance and improved accuracy delivered by
the additional computing capacity. All four of the pillars require
continuous and balanced strengthening in order to achieve significant
advancements in our environmental prediction capabilities.
Question. How could better forecasting capabilities help reduce the
economic impact of the increased natural catastrophes?
Answer. In addition to advising the public and our partners of
immediate impacts that threaten life and property, National
Oceanographic and Atmospheric Administration's (NOAA) environmental
forecasts and warnings also provide the capability to mitigate the
economic impact of the wide variety of natural hazards that face our
Nation through advanced alerts to potential impacts.
Improved numerical model information would enable NOAA forecasters
to produce forecasts and warnings with increased confidence,
consistency, and accuracy. Even a small improvement in forecast
accuracy can result in more effective and/or timely positioning of
critical and limited resources ahead of and even during environmental
disasters. This is key to saving lives and containing cost.
Specific scenarios follow to illustrate these and additional
benefits of improved forecasts to users, sectors, or others:
Climate
Improved seasonal forecasts would enable more effective actions
across a number of economic sectors, from optimizing the seasonal
acquisition of road salt supplies, to planning ship routing and timing
strategies, to long-term actions associated with clothing and food
supplies. In addition, improved seasonal forecasts would facilitate
more efficiency in planning the opening and closing of fisheries, and
recreational areas/beaches.
Improved forecasting capabilities would enable users of climate
information to better prepare for extremes in weather and climate and
attempt to mitigate them. For instance, the State of California
determined a savings of around $1 billion during the 1997-1998 El Nino
compared to the 1982-1982 El Nino. This is largely attributed to having
enough time to implement extensive mitigation activities.\1\ Other
sectors of the economy that stand to benefit from improved forecasts
include water resource managers, energy producers, distributors, and
providers, the transportation and agricultural sectors, to name a few.
---------------------------------------------------------------------------
\1\ Chagnon, S.A. (ed.) (2000). El Nino 1997-1998: The Climate
Event of the Century. New York, NY: Oxford University Press, 147-148.
---------------------------------------------------------------------------
Aviation
Improved forecasting capabilities would reduce economic impacts
resulting from air traffic delays. The total cost of domestic air
traffic delays to the U.S. economy in 2007 was as much as $41 billion,
with an estimated $10 billion lost by industries that rely on air
traffic for supplies or customers (U.S. Congressional Joint Economic
Committee, 2008). Weather is the major cause of most flight delays,
reroutes and cancellations.
NOAA will support the FAA in its evolution to the Next Generation
Air Traffic Control System (NextGen) through provision of a four-
dimensional (three-dimensional space along with time) cube of weather
information, which will be used to project conditions for airline
trajectories in space and time, requiring improvements in spatial and
time-scale forecast accuracy.
Winter Storm
Improved weather modeling would lead to better preparation for
severe winter storms, including readying of equipment, personnel, and
supplies to fight effects of a heavy snow, ice storm, or severe cold
outbreak. Advanced warnings could save additional millions of dollars
in potential disruptions, power outages, stranded planes, and
commerce.\2\ In general, improved weather forecasts would support
optimization of surface rail and road systems, ensure on-time delivery
of services, minimize infrastructure and capacity damage, and improve
maintenance scheduling.
---------------------------------------------------------------------------
\2\ Adams, R., L. Houston, and R. Weiher, (2004, August), ``The
Value of Snow and Snow Information Services,'' Report prepared for
NOAA's National Operational Hydrological Remote Sensing Center.
Chanhassen, MN.
---------------------------------------------------------------------------
Flood
High-resolution, geo-referenced flood forecast inundation maps
would enable emergency managers to preposition people and resources to
more effectively reduce the impacts of flood events. These maps depict
the areal extent and depth of flood waters, linked with other
infrastructure and demographic information such as FEMA's HAZUS. It
would also enable the high-resolution water resources analyses and
forecasts (e.g., soil moisture, evapotranspiration, ground water, water
quality, snow water equivalent) necessary to better manage our
increasingly limited water supply and support routine high-value
decisions in the transportation, hydropower, agricultural, water
supply, recreational, and floodplain management sectors.
Improved forecasts of runoff and stream discharge, if combined with
high-resolution, geo-referenced flood forecast inundation maps
depicting the areal extent and depth of flood waters, could also be
linked to infrastructure- and demographic-based information, to
facilitate the pre-positioning of resources to reduce the impacts of
flooding events.
Marine
Improved forecasting capabilities would help to better inform the
decisions made by commercial and recreational fishermen, such as
whether to stay in port, remain at sea, or alter course depending on
forecast conditions, thus maximizing resources and safety, while
reducing economic impact and loss of life.
Charter fishing guides could make better decisions by knowing, days
in advance, when staying in port or going out would be in the best
interest of their vessels or customers. Maintenance could be scheduled
well ahead for bad weather days, saving the economic loss of performing
maintenance when they could be carrying passengers and earning revenue.
Large ship (oil tankers, container ships, aircraft carriers)
operators at sea could alter course and speed to avoid or mitigate
storm conditions affecting their route, thus preventing loss of cargo
and/or personnel.
Coast Guard and other rescue operators could better anticipate
needs for additional manpower, and adjust staffing to meet anticipated
needs.
Fire Weather
Improved forecasting of key fire weather variables such as
temperature, humidity, and wind would reduce the risk of firefighter
and public fatalities by providing advanced notice of fire movement and
extreme fire behavior. This would, in turn, allow appropriate
evacuations and safe fire management tactics to be implemented in a
more effective and cost-effective manner.
Improved fire weather forecasts would also allow for more efficient
prepositioning of firefighting resources before an anticipated fire
outbreak. This would increase initial attack success, and therefore
lower the risk of large, costly wildfires. Also, improved fire weather
forecasts would support safer and more cost-effective land management
treatments, and would greatly lessen the risk of escaped prescribed
burns.
Tropical Storm/Hurricane
Improved hurricane forecasts would reduce impacts from unnecessary
evacuations along the Nation's coastlines prior to hurricane landfall.
These impacts reach farther than the great inconvenience and cost of
moving large numbers of people out of potential danger, with lost
business revenues and nationwide resource impacts due to significant
transportation delays.
Improved storm surge forecasts would result from improved hurricane
track and intensity forecasts, resulting in far better mitigation plans
for resulting flood impacts, targeted to the areas which need it.
Improved hurricane forecasting would reduce the amount of lives and
property lost from unforeseen rapid deepening of storms as they
approach land. An example is Hurricane Charley in 2004, which rapidly
intensified to a Category 4 hurricane before making landfall in
southwest Florida, where it claimed at least 16 lives and left tens of
thousands seeking emergency shelter.
NOAA's making targeted investments toward improvements in these
forecasts.
______
Questions Submitted to David C. Trimble
DANGERS AND DRAWBACKS OF FRAGMENTED MANAGEMENT
Question. Mr. Trimble, in the Government Accountability Office's
(GAO) prepared statement you make an observation that can be
attributed, regrettably, to a wide array of disparate Government
programs. I recall hearing a similar refrain relating to our Nation's
fragmented food safety system.
You explain that ``when agencies do not collaborate well when
addressing a complicated, interdisciplinary issue (like climate
change), they may carry out programs in a fragmented, uncoordinated
way, resulting in a patchwork of programs that can limit the overall
effectiveness of the Federal effort.'' These stovepipes can also mean
redundancies, management challenges, and competition for scarce funds.
What are the key ingredients of a new approach to doing business
and instituting a Government wide approach?
Answer. Based on our past work (GAO-06-15, GAO/GGD-00-106) key
practices that can help agencies enhance and sustain their Government
wide collaborative efforts include:
--defining and articulating a common outcome among agencies with
different missions;
--agreeing on roles and responsibilities in achieving the common
outcome;
--establishing compatible policies, procedures, and other means to
operate across agency boundaries;
--identifying and addressing needs by leveraging resources, such as by
collectively funding interagency initiatives; and
--developing mechanisms to monitor, evaluate, and report on results.
As we have previously reported (GAO/T-GGD-00-26), perhaps the
single most important element of successful management improvement
initiatives is the demonstrated commitment of top leaders to change.
Top leadership involvement and clear lines of accountability are
critical to overcoming natural resistance to change, marshalling needed
resources, and building and maintaining the commitment to new ways of
doing business.
Question. What impediments need to be removed in order to make a
different approach workable?
Answer. As reported in our October 2009 report on climate change
adaptation (GAO-10-113), we found that the challenges faced by Federal,
State, and local officials in their efforts to adapt to climate change
fell into several categories. First, available attention and resources
were focused on more immediate needs, making it difficult for
adaptation efforts to compete for limited funds. Second, without
sufficient site-specific data, such as local projections of expected
changes, it is hard to predict the impacts of climate change and thus
hard for officials to justify the current costs of adaptation efforts
for potentially less certain future benefits. Third, adaptation efforts
are constrained by a lack of clear roles and responsibilities among
Federal, State, and local agencies.
According to Federal, State, and local officials we interviewed and
other information we analyzed for our October 2009 report, potential
Federal actions for addressing such challenges fall into three areas:
--Federal training and education initiatives that could increase
awareness among Government officials and the public about the
impacts of climate change and available adaptation strategies;
-- actions to provide and interpret site-specific information that
could help officials understand the impacts of climate change
at a scale that would enable them to respond; and
--steps the Congress and Federal agencies could take to encourage
adaptation by setting priorities and re-evaluating programs
that hinder adaptation efforts.
In our October 2009 report, we recommended that the appropriate
entities within the Executive Office of the President (EOP) develop a
national adaptation plan that includes setting priorities for Federal,
State, and local agencies. The Council on Environmental Quality (CEQ)
generally agreed with our recommendations, and said that the
Interagency Climate Change Adaptation Task Force will prepare a report
in October 2011 that documents its progress.
In addition, our May 2011 report on Federal climate change funding
(GAO-11-317) found that agencies do not consistently interpret methods
for defining and reporting the funding of climate change activities,
and that Federal officials lack a shared understanding of priorities,
partly due to multiple, often inconsistent messages articulated in
different sources, such as strategic plans. We also found that existing
mechanisms intended to align funding with Government wide priorities
are nonbinding and limited when in conflict with agency priorities.
Federal officials who responded to a Web-based questionnaire for this
report and other sources identified ways to better align Federal
climate change funding with strategic priorities, including:
--options to improve the tracking and reporting of climate change
funding;
--options to enhance how strategic climate change priorities are set;
--the establishment of formal coordination mechanisms; and
--continuing efforts to link related climate change activities across
the Federal Government.
In May 2011, we reported that Federal entities were already taking
steps to implement several of these options. Specifically, the
Interagency Climate Change Adaptation Task Force, co-chaired by CEQ,
the National Oceanic and Atmospheric Administration (NOAA), and the
Office of Science and Technology Policy (OSTP), was formed to develop
Federal recommendations for adapting to climate change impacts and to
recommend key components to include in a national strategy. In
addition, the NOAA's proposed Climate Service would, according to NOAA,
provide a single, reliable, and authoritative source for climate data,
information, and decision-support services to help individuals,
businesses, communities, and governments make smart choices in
anticipation of a climate changed future.
In our May 2011 report, among other things, we recommended that the
appropriate entities within the EOP, in consultation with the Congress
clearly establish Federal strategic climate change priorities and
assess the effectiveness of current practices for defining and
reporting related funding. We requested comments on a draft of this
report from the chair of CEQ, the Director of the Office of Management
and Budget, and the Director of the OSTP. They did not provide official
written comments to include in our report. Instead, they provided
technical comments, which we incorporated as appropriate.
ADDRESSING GOVERNMENT CHALLENGES BY ADAPTING PRIVATE SECTOR TOOLS
In the prepared statement for the hearing, the GAO sets forth three
categories of the challenges faced by government officials at all
levels in their efforts to adapt to climate change.
The GAO cites ``focusing on immediate needs'', ``insufficient site-
specific data'', and ``lack of clear roles and responsibilities'' as
the key areas which hamper informed Government decisionmaking.
GAO references the lack of adequate computational modeling in an
example about how a Florida marine sanctuary had difficulty planning,
and lacked inventories and monitoring systems to frame a baseline of
the types of plants and animals thriving on the resources they managed,
thus making it hard to know whether particular habitat changes they
observed are ``normal'' or aberrant.
Question. Does this data problem facing the Government stem from a
wholesale lack of any models that could be adapted?
Answer. Based on our prior work, finding the right model for the
right application is challenging. Interpreting the output of such
models can be equally, if not more challenging. Senior Federal
officials spoke of the need for a ``clearinghouse'' to validate
available models which can be of varying quality. The National Research
Council (NRC) is analyzing many of these issues right now in a study
titled ``A National Strategy for Advancing Climate Modeling.''
Question. Why do agencies have such difficulty developing the kinds
of important information they need to analyze impacts and better
understand long-term exposure to risk as a result of changing weather
events?
Answer. As we reported in October 2009, adaptation information
challenges generally fit into two categories:
--the difficulty in justifying the current costs of adaptation with
limited information about future benefits; and
--translating climate data--such as projected temperature and
precipitation changes--into information that officials need to
make decisions.
According to a recent NRC report, while the costs of policies to
mitigate and adapt to climate change may be considerable, it is
difficult to estimate the costs of inaction--costs which could be much
greater. This report cites the long time horizon associated with
climate change, coupled with deep uncertainties associated with
forecasts and projections, among other issues, as aspects of climate
change that are challenging for decisionmaking.
As we reported in October 2009, the process of providing useful
information to officials making decisions about adaptation can be
summarized in several steps, each of which is complicated. First, data
from global-scale models must be ``downscaled'' to provide climate
information at a geographic scale relevant to decisionmakers. Second,
climate information must be translated into impacts at the local level,
such as increased stream flow. Third, local impacts must be translated
into costs and benefits, since this information is required for many
decisionmaking processes. Fourth, decisionmakers need baseline
monitoring data to evaluate adaptation actions over time.
Question. How complicated would it be, in terms of time and
resources, to compile inventories to establish foundational starting
points to better recognize and measure environmental change (and the
impact of an increase in frequency or severity of weather-related
events) when it is observed?
Answer. We have not evaluated the time or resources needed to
establish or improve monitoring systems for weather-related events.
Regarding efforts to measure environmental change and the impact of an
increase in the observed frequency or severity of weather-related
events, NOAA tracks and consolidates data on its climate services Web
site at http://www.climate.gov/#climateWatch. Data on this site are
provided by various NOAA centers, including the National Climatic Data
Center and the National Weather Service Climate Prediction Center. In
addition, we are currently reviewing the NOAA's U.S. Historical
Climatology Network, used to track national trends in basic
meteorological variables such as temperature and precipitation.
Question. What private sector experiences, techniques, and lessons
learned would be useful to evaluate and adapt to address the challenges
the GAO describes?
Answer. Our 2007 report on Federal flood and crop insurance
programs (GAO-07-285) found that many major private insurers were
proactively incorporating some near-term elements of climate change
into their risk management practices. In addition, other private
insurers were approaching climate change at a strategic level by
publishing reports outlining the potential industry-wide impacts and
strategies to proactively address the issue. Statements from the
reinsurance industry at your July 28 hearing emphasized these issues.
In addition, we are beginning an engagement on climate change
adaptation and infrastructure development. As we noted in our October
2009 report (GAO-10-113), of particular importance in adaptation are
planning decisions involving physical infrastructure projects, which
require large capital investments and which, by virtue of their
anticipated lifespan, will have to be resilient to changes in climate
for many decades. The techniques used by the private sector and lessons
arising from this work may also prove useful.
CONCLUSION OF HEARING
Senator Durbin. This hearing of the subcommittee stands
recessed.
[Whereupon, at 3:15 p.m., Thursday, July 28, the hearing
was concluded, and the subcommittee was recessed to reconvene
subject to the call of the Chair.]
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