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Millions of Carolina Homes Are at Risk of Flooding. Only 335,000 Have Flood Insurance. Millions of Carolina Homes Are at Risk of Flooding. Only 335,000 Have Flood Insurance.
(35 minutes later)
Some 31 million people in the Carolinas are at risk of their homes flooding because of Hurricane Florence. Only about 335,000 homes in the two states have flood insurance. Millions of people in the Carolinas are at risk of their homes flooding because of Hurricane Florence. Only about 335,000 homes in the two states have flood insurance.
The math is simple, and the result is ugly: Many people affected by the storm are going to have to pay for repairs to their damaged homes out of their own pockets.The math is simple, and the result is ugly: Many people affected by the storm are going to have to pay for repairs to their damaged homes out of their own pockets.
If that sounds familiar, it’s because the same thing happened last year after Hurricane Harvey flooded Houston and, to a lesser extent, after Hurricanes Irma in Florida and Maria in Puerto Rico.If that sounds familiar, it’s because the same thing happened last year after Hurricane Harvey flooded Houston and, to a lesser extent, after Hurricanes Irma in Florida and Maria in Puerto Rico.
Standard homeowners’ insurance does not cover flooding, but coverage is available from the federal government. Anybody can buy it, but not many do. If the National Flood Insurance Program worked as intended, more people would have coverage. But it doesn’t work as intended.Standard homeowners’ insurance does not cover flooding, but coverage is available from the federal government. Anybody can buy it, but not many do. If the National Flood Insurance Program worked as intended, more people would have coverage. But it doesn’t work as intended.
Here’s why.Here’s why.
Congress established the program in 1968, hoping to lure insurance companies back into a market they abandoned after the Great Mississippi Flood of 1927. That year, multiple levees failed and left thousands of people homeless. Insurers saw that paying flood claims on that scale could wipe them out. Congress established the program in 1968, hoping to lure insurance companies back into a market they abandoned after the Great Mississippi Flood of 1927. That year, multiple levees failed, leaving thousands of people homeless. Insurers saw that paying flood claims on that scale could wipe them out.
Virtually all insurers dropped flood coverage, and for decades, you couldn’t buy it. Hurricanes and flooding didn’t stop, of course. All people could do in a flood was hope for federal relief — a taxpayer bailout — and if there wasn’t any, families could be bankrupted.Virtually all insurers dropped flood coverage, and for decades, you couldn’t buy it. Hurricanes and flooding didn’t stop, of course. All people could do in a flood was hope for federal relief — a taxpayer bailout — and if there wasn’t any, families could be bankrupted.
Congress eventually decided it would be better to identify flood-prone homeowners, require them to buy insurance every year, let a pool of reserves build up, and pay flood claims out of it to keep the taxpayers off the hook. Congress eventually decided it would be better to identify flood-prone homeowners, require them to buy insurance every year, let a pool of reserves build up and pay flood claims out of it to keep the taxpayers off the hook.
The program started out as a partnership between the government and about 130 insurers. But there were policy clashes, and by 1983 the companies were gone and the government was running the program alone. Today the National Flood Insurance Program is part of the Federal Emergency Management Agency.The program started out as a partnership between the government and about 130 insurers. But there were policy clashes, and by 1983 the companies were gone and the government was running the program alone. Today the National Flood Insurance Program is part of the Federal Emergency Management Agency.
“The problem is that the mandate is not enforced,” said Howard Mills, a former New York State insurance superintendent who now works at the consulting firm Deloitte.“The problem is that the mandate is not enforced,” said Howard Mills, a former New York State insurance superintendent who now works at the consulting firm Deloitte.
The enforcement mechanism — requiring people in flood zones to buy insurance — is supposed to be the mortgage industry. Any time a house on a federally designated flood plain changes hands, the lender is supposed to make the buyer purchase a flood-insurance policy.The enforcement mechanism — requiring people in flood zones to buy insurance — is supposed to be the mortgage industry. Any time a house on a federally designated flood plain changes hands, the lender is supposed to make the buyer purchase a flood-insurance policy.
“But there are lots of holes and gaps, and people just don’t get coverage,” Mr. Mills said. Flood plains change as land gets developed, and the government’s maps become outdated. People buy houses without knowing they are on flood plains, or they pay off their mortgages and let their policies lapse. Those who inherit property may never have mortgages to begin with. “But there are lots of holes and gaps, and people just don’t get coverage,” Mr. Mills said. Flood plains change as land is developed, and the government’s maps become outdated. People buy houses without knowing they are on flood plains, or they pay off their mortgages and let their policies lapse. Those who inherit property may never have mortgages to begin with.
Last year, a research team recalculated flood exposures around the country, using newer, sharper methods than the ones the flood program uses. It found that about 41 million Americans lived on 100-year flood plains — areas that have a 1 percent chance of flooding in any given year — more than three times the number enrolled in the National Flood Insurance Program.Last year, a research team recalculated flood exposures around the country, using newer, sharper methods than the ones the flood program uses. It found that about 41 million Americans lived on 100-year flood plains — areas that have a 1 percent chance of flooding in any given year — more than three times the number enrolled in the National Flood Insurance Program.
The researchers said they expected the number of people living on flood plains — as well as the total value of their property and the flood program’s financial exposure — to keep rising because of climate change and demographic trends.The researchers said they expected the number of people living on flood plains — as well as the total value of their property and the flood program’s financial exposure — to keep rising because of climate change and demographic trends.
Although those metrics are more precise, it’s unlikely the government will take advantage of them.Although those metrics are more precise, it’s unlikely the government will take advantage of them.
Congress has repeatedly cut federal funding for flood mapping in recent years, so the government probably won’t embrace a change that would dramatically increase the flood insurance program’s costs. Congress has repeatedly cut federal funding for flood mapping in recent years, so the government probably won’t embrace a change that would significantly increase the flood insurance program’s costs.
The research report, published by Environmental Research Letters, found that existing flood maps accurately measured the risks along the coasts, but didn't capture nearly all the risk in inland areas.The research report, published by Environmental Research Letters, found that existing flood maps accurately measured the risks along the coasts, but didn't capture nearly all the risk in inland areas.
Yet inland flooding is in some ways more perilous. A study by the National Hurricane Center found that more than half of the Americans killed by flooding during hurricanes and tropical storms over a 30-year period died after the storms moved inland, presenting hazards like flash floods and mudslides and sweeping motorists off flooded roads. Yet inland flooding is in some ways more perilous. A study by the National Hurricane Center found that more than half the Americans killed by flooding during hurricanes and tropical storms over a 30-year period had died after the storms moved inland, presenting hazards like flash floods and mudslides and sweeping motorists off flooded roads.
And it’s many of the people affected by those hazards who don’t have flood insurance.And it’s many of the people affected by those hazards who don’t have flood insurance.
People near the coasts tend to know their risks. Owners of expensive beach houses often buy even more flood insurance than they have to, because the government’s mandatory coverage is capped at $250,000 per house plus $100,000 for the contents. On top of that, additional “layers” of coverage can be purchased from private insurers.People near the coasts tend to know their risks. Owners of expensive beach houses often buy even more flood insurance than they have to, because the government’s mandatory coverage is capped at $250,000 per house plus $100,000 for the contents. On top of that, additional “layers” of coverage can be purchased from private insurers.
In the Carolinas, a quarter to half of the households near the coast are insured, said Ray Lehmann, a member of SmarterSafer, a coalition of taxpayer groups, environmental organizations, insurers and others that has pushed for flood-insurance reform.In the Carolinas, a quarter to half of the households near the coast are insured, said Ray Lehmann, a member of SmarterSafer, a coalition of taxpayer groups, environmental organizations, insurers and others that has pushed for flood-insurance reform.
Further inland, it’s another story.Further inland, it’s another story.
“We’re talking about places in North Carolina where the coverage is less than 1 percent,” said Mr. Lehmann, also the director of finance, insurance and trade policy at the R Street Institute, a think tank that promotes free market policies. “We’re talking about places in North Carolina where the coverage is less than 1 percent,” said Mr. Lehmann, also the director of finance, insurance and trade policy at the R Street Institute, a think tank that promotes free-market policies.
Uninsured homeowners can still get loans from the federal government to pay for repairs to their flood-damaged homes, but the loans have to be repaid. And finding a suitable loan program, filing the paperwork and waiting for the money takes longer than filing an insurance claim would have.Uninsured homeowners can still get loans from the federal government to pay for repairs to their flood-damaged homes, but the loans have to be repaid. And finding a suitable loan program, filing the paperwork and waiting for the money takes longer than filing an insurance claim would have.
Not well. It needs more premium-paying policyholders, said Mr. Lehmann. That would spread the risks over a bigger group. As of now, the program does not bring in enough revenue to cover the cost of payouts to homeowners. On average, it has run a $1.4 billion annual deficit since Hurricane Katrina.Not well. It needs more premium-paying policyholders, said Mr. Lehmann. That would spread the risks over a bigger group. As of now, the program does not bring in enough revenue to cover the cost of payouts to homeowners. On average, it has run a $1.4 billion annual deficit since Hurricane Katrina.
The program can borrow up to $30.4 billion from the Treasury, but it has been unable to pay the money back. Congress tried to raise flood-insurance premiums in 2012, to bring them into line with the cost of claims. But homeowners rebelled and the law was repealed two years later. The program can borrow up to $30.4 billion from the Treasury, but it has been unable to pay the money back. Congress tried to raise flood-insurance premiums in 2012, to bring them into line with the cost of claims. But homeowners rebelled, and the law was repealed two years later.
The program currently owes the Treasury more than $20 billion, but that’s only because Congress forgave $16 billion of debt last fall.The program currently owes the Treasury more than $20 billion, but that’s only because Congress forgave $16 billion of debt last fall.
That debt forgiveness was essentially a taxpayer bailout. In other words, federal taxpayers are still paying to repair flood-damaged houses today, much as they did before the flood-insurance program was established.That debt forgiveness was essentially a taxpayer bailout. In other words, federal taxpayers are still paying to repair flood-damaged houses today, much as they did before the flood-insurance program was established.
Yes. The program can still borrow nearly $10 billion before reaching its borrowing capacity. And it has roughly $6 billion in cash, Mr. Lehmann said. That probably would be enough to pay claims from Hurricane Florence.Yes. The program can still borrow nearly $10 billion before reaching its borrowing capacity. And it has roughly $6 billion in cash, Mr. Lehmann said. That probably would be enough to pay claims from Hurricane Florence.
“But there are more storms on the way,” he said.“But there are more storms on the way,” he said.
Hurricane season officially ends on Nov. 30. That is also the day the flood insurance program’s authorization to spend money expires. But Congress will almost certainly provide a temporary extension by then.Hurricane season officially ends on Nov. 30. That is also the day the flood insurance program’s authorization to spend money expires. But Congress will almost certainly provide a temporary extension by then.
Lawmakers have been working on wide-ranging reform proposals, but those have been lingering for more than a year. And with the midterm elections approaching on Nov. 6, an agreement on a long-term solution will be elusive.Lawmakers have been working on wide-ranging reform proposals, but those have been lingering for more than a year. And with the midterm elections approaching on Nov. 6, an agreement on a long-term solution will be elusive.