Published: Wed, September 13, 2017
World | By Paul Elliott

US Insurance Program Could Pay $11B For Harvey

US Insurance Program Could Pay $11B For Harvey

"Why are we writing flood insurance (policies) for new construction in flood zones?" asks Craig Fugate, who headed the Federal Emergency Management Agency in the Obama administration.

White counseled a far more comprehensive approach.

About 400,000 homes in the counties affected by Harvey have policies, as do about 500,000 homes in counties along the Florida Gulf Coast.

If RMS' estimate is correct at $35 billion or even the upper bound at $40 billion, including up to $10 billion for the NFIP, it suggests a private re/insurance and ILS market loss of up to $25 billion or even $30 billion at the upper bound from Harvey, higher than previous estimates.

Given the subsidized flood insurance, should we be surprised that millions of Americans live in harm's way, on flood plains? After the Mississippi River flood of 1993, one Grafton, Ill., resident explained to a reporter that he had collected $24,000 in federal insurance for damage to his small house from floods in 1979, 1982, 1986 and 1992.

An advocacy group started by victims of Hurricane Sandy have a message for the thousands of USA homeowners affected by Hurricane Irma and Hurricane Harvey: Get ready to be tortured by FEMA's National Flood Insurance Program (NFIP). It passed a bill in 2012 that would have raised premiums, but after an outcry from numerous 5 million policyholders, Congress changed the program again in 2014 to cap the increases policyholders would have to pay. As a outcome, it began enrolling communities into the program without having a precise idea of the risks involved; at the same time, rampant development in flood plains continued, making it next to impossible for the government to keep up.

Legislative efforts to reform the National Flood Insurance Program to put it on firmer fiscal footing have produced mixed results.

Extensive flood damage can lead to financial ruin for the uninsured. It noted that for the FIA to map all the nation's at-risk communities, it would need to pick up the pace, completing 2,600 studies a year.

The National Flood Insurance Program (NFIP) has been extended through December 8, part of H.R. 601 passed by the House and Senate on Thursday and signed swiftly into law by President Trump on Friday. Part of the problem was that this restriction went into effect just as banks started to securitize mortgages. Unlike a typical homeowner's policy, a mobile home policy may include flood coverage.

The government has known for decades that homeowners in flood zones often don't have the insurance they should.

"All the sudden you're paying a loan on your house along with your mortgage", said Bob Hunter, the director of insurance for the Consumer Federation of America and the former Commissioner of Insurance for the state of Texas.

Congress attempted to fix this mess by passing an overhaul of the NFIP in 2012. While Washington falls all over itself to throw federal aid to devastated areas ahead of the mid-term elections, calls for crippling the crop insurance program will continue. Both the farmer and the government pay a portion of an insurance premium to protect against these risks, because both have a vested interest in that crop being produced. But two years later, feeling the political heat, lawmakers backtracked.

But it won't last. "And I think greatly discourage development in unsafe areas", Pilkey said. No amount of disaster relief will change that.

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