NEW YORK (Reuters) – A climate research organization will offer access to a risk model that predicts the likelihood of housing flooding throughout the United States, and will give the public a look at the data that institutional investors use to measure risk .
FILE PHOTO: A neighborhood wrapped in the waters of the Arkansas River is shown in this aerial photo in Fort Smith, Arkansas, USA. UU., May 30, 2019. REUTERS / Drone Base / File Photo
First Street Foundation launched Flood Lab on Tuesday, a research association that provides eight universities with its model that maps previous instances of floods and future risks. Using the data set, Wharton, MIT and John Hopkins University, among others, will quantify the impacts of floods on the US economy.
The measure could put pressure on housing prices, municipal bonds and mortgage-backed securities linked to real estate in risk-prone areas, according to Matthew Eby, executive director of the First Street Foundation research organization, and other participants in Flood Lab
The data will be made available to the public in the first half of 2020 in an online database that can be searched by address.
About 62 million American households have a moderate to severe flood risk, Verisk data analysis firm estimated.
The main risk model firms such as Risk Management Solutions, CoreLogic, AIR Worldwide and KatRisk are currently the only providers of that information, which they sell to large insurers, mortgage lenders and investment firms. But the cost, which can reach seven figures a year, is prohibitive for universities, smaller financial firms and homeowners.
“We tried to get some of the data from one of the suppliers and they quoted us an astronomical price,” said Benjamin Keys, a professor of real estate economics at Wharton.
First Street says its model rivals those of large private companies. While there have been researchers who model flood risk for a long time, the timeframe and geographic scope have been limited since labor and cost have been too large for any university. First Street currently has about 70 researchers working on its model, more than some of the companies that own it.
Private risk modeling agencies will continue to have business: they offer other catastrophic risk data on a global scale and there is a demand for multiple models. But a public option could generate competitive prices and a demand for transparency around methodologies.
However, the most lasting impact is likely to be on homeowners.
“Where does your average owner get that flood risk information and make an optimal decision?” Asked Carolyn Kousky, executive director of the Wharton Risk Center.
“I think that’s the place where First Street will really be harmful.”
Kate Duguid reports; Edition by Stephen Coates