Flood insurance in America is under scrutiny, and most of the effort is aimed at dealing with what the federal government calls the “severe repetitive loss property.”
Those are homes which have cost taxpayers cumulative payouts which exceeding what those structures are actually worth – and often by many thousands of dollars. It’s thought that across the nation there are more than 11,000 properties – mostly in coastal or low-lying areas – which are under threat due to climate change and proposed real estate and land development.
As an example, a single home near Baton Rouge, LA, valued at about $56,000, has suffered from flood damage some 40 times in total. The result? Claims totaling nearly $430,000 for repairs. In yet another extreme example a $90,000 home hard by the Mississippi River near St. Louis has resulted in claims in excess of $600,000.
In a truly egregious example, one home near Houston has received – prepare yourself – more than $1 million in payouts over the years. That’s what it took to repair flood damage on a home with an assessed value of $72,000.
The data comes from the Federal Emergency Management Agency, the federal agency tasked with oversight of the current insurance program. While these expensive examples are but a tiny slice of the 5 million active policies included in the program, cases like them generally accounted for nearly a third of the total claims paid out.
The National Flood Insurance Program is currently approaching $25 billion in the red – with little hope of recovering the funds, at least according to Roy Wright of NFIP.
“Only Congress can deal with that past loss. What we’re focused on today is ensuring that going forward, we’re putting ourselves on a sound financial footing,” Wright says.
Regardless of the difficulties, the NFIP retains solid bipartisan support it serves victims in all 50 states.
Of course, data reveals that the worst of the flooding occurs on the Gulf Coast of Louisiana and Texas. Homes near the Mississippi River are also at risk, as are Atlantic coastal structures.
Legislators are faced with a Hobson’s Choice of maintaining mandate rates on the twenty percent of homeowners who pay sub-market premiums per Congress or suffering a brutal and high-profile public backlash over affordability.
“No congressman ever got unelected by providing cheap flood insurance,” says Rob Moore of the Natural Resources Defense Council, an expert on the details of the NFIP.
Despite all the controversy (the Trump administration wants to cut $190 out of the program, flooding still stands as the most expensive of natural disasters in the United States, and experts say that over the next two decades almost 170 coastal communities will face chronic flooding at least 26 times a year.
And the problem is unlikely to go away anytime soon. Hurricane Katrina resulted in a $17.5 billion hit to the U.S. treasury and Hurricane Sandy totaled approximately 144,000 claims and racked up nearly $6.25 billion in debt.
The Government Accountability Office says the NFIP is in a no-win position as “FEMA is tasked with pursuing competing programmatic goals — keeping flood insurance affordable while keeping the program fiscally solvent.”
And the real problem may well be that the program can’t reasonably be eliminated or significantly cut back without disastrous consequences.
“Flood disasters today would be truly grim but for NFIP. It definitely has problems. It needs improving. But it’s a hell of a lot better than it was when there was nothing,” says flood expert Nicholas Pinter, geology professor at the University of California at Davis.