An agent-based model for evaluating reforms of the National Flood Insurance Program: A benchmarked model applied to Jamaica Bay, NYC

43 Pages Posted: 7 Apr 2021

See all articles by Lars de Ruig

Lars de Ruig

VU University Amsterdam - Institute for Environmental Studies (IVM)

Toon Haer

VU University Amsterdam - Institute for Environmental Studies (IVM)

Hans de Moel

VU University Amsterdam - Institute for Environmental Studies (IVM)

Philip Orton

Stevens Institute of Technology

W.J.W. Botzen

VU University Amsterdam - Institute for Environmental Studies (IVM)

J.C.J.H. Aerts

VU University Amsterdam - Institute for Environmental Studies (IVM)

Date Written: November 08, 2020

Abstract

Coastal flood risk is expected to increase as a result of climate change effects, such as sea level rise, and socio-economic growth. To support policy makers in making adaptation decisions, accurate flood risk assessments that account for the influence of complex adaptation processes on the developments of risks are essential. In this study, we integrate the dynamic adaptive behavior of homeowners within a flood risk modeling framework. Focusing on building-level adaptation and flood insurance, the agent-based model is benchmarked with empirical data for New York City, USA. The model simulates the National Flood Insurance Program (NFIP) and frequently proposed reforms to evaluate their effectiveness, applied to a case study of Jamaica Bay, NY. Our results indicate that risk-based premiums can improve insurance penetration rates and the affordability of insurance compared to the baseline NFIP market structure. While a premium discount for disaster risk reduction incentivizes more homeowners to invest in dry-floodproofing measures, it does not significantly improve affordability. A low interest rate loan for financing risk-mitigation investments improves the uptake and affordability of dry-floodproofing measures. The benchmark and sensitivity analyses demonstrate how the behavioral component of our model matches empirical data and provides insights into the underlying theories and choices that autonomous agents make.

Keywords: Affordability, Agent-based Model, Disaster Risk Reduction, Dynamic Adaptive Behavior, Flood Insurance

JEL Classification: Q54, Q56

Suggested Citation

de Ruig, Lars and Haer, Toon and de Moel, Hans and Orton, Philip and Botzen, W.J.W. and Aerts, J.C.J.H., An agent-based model for evaluating reforms of the National Flood Insurance Program: A benchmarked model applied to Jamaica Bay, NYC (November 08, 2020). Available at SSRN: https://ssrn.com/abstract=3820691 or http://dx.doi.org/10.2139/ssrn.3820691

Lars De Ruig (Contact Author)

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1087
Amsterdam, 1081HV
Netherlands

Toon Haer

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1087
Amsterdam, 1081HV
Netherlands

Hans De Moel

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1087
Amsterdam, 1081HV
Netherlands

Philip Orton

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

W.J.W. Botzen

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands

J.C.J.H. Aerts

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands

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