Working Paper

Household, Bank, and Insurer Exposure to Miami Hurricanes: a flow-of-risk analysis

Abstract: We analyze possible future financial losses in the event of hurricane damage to Miami residential real estate, where the hurricane's destructiveness reflects climate-change. We focus on three scenarios: (i) a business-as-usual scenario, (ii) a Hurricane-Ian-spillovers scenario, and (iii) a cautious-markets scenario. We quantify bank exposures and loss rates, where exposures are proportional to the size of real estate markets and loss rates depend on post-hurricane devaluations and insurance coverage. This quantitative methodology could complement modeling of local economy impacts, stress on public finances, asset market losses, and other financial developments that will also affect banks.

Keywords: Climate-related risk; Financial stability; Flow of risk; Real estate loans;

JEL Classification: Q54; R31; G20;

https://doi.org/10.17016/FEDS.2023.013

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2023-02-13

Number: 2023-013