Flood insurance hot topic for 2013
Last week all children both naughty and nice were listening for the patter of little hooves on the roof and the great big "Ho Ho Ho" from the sleigh behind. However, in the new year their parents will be listening to the patter of rain drops on the roof or the rising of the tide or a combination of both.
I’m not sure of the statistics but my educated guess is that 90 percent of homeowners who will be reading this newspaper will also be paying a premium for National Flood Insurance. The flood insurance program was created by Congress in 1968 to fill a void since few private insurance carriers provided flood insurance. The insurance was designed to provide an insurance alternative to disaster assistance to meet the costs of repairing and replacing damaged buildings caused by floods. The program insures over 5 million homes most of which are in Texas and Florida.
In exchange for this insurance protection participating communities were asked to adopt and enforce a floodplain management ordinance. The goal was to reduce future flood risks in accordance with floodplain mapping depicted on Flood Insurance Rate Maps managed by a division within the Federal Emergency Management Agency.
These policies are now offered through private insurers in partnership with the federal government and have proven to be a money maker for the private insurance industry. They sell and service the insurance, collect the premiums but don’t assume any of the risk, and pocked approximately $1 billion a year from the premiums collected out of the $3.5 billion in annual premiums collected. The program is currently between $17 and $18 billion in debt, a number that is likely to increase by a multimillion figure as a result of Hurricane Sandy, which ranks as the nation’s second worst storm for claims paid out by the National Flood Insurance Program.
In addition, flood insurance is mandatory for homeowners with a federally backed mortgage if they live in an area subject to flooding at least once every 100 years. The average annual flood insurance premium is about $615 but for homes in higher risk areas can cost up to $3,000, premiums that don’t even come close to the cost of rebuilding in a major flooding event.
I’m bringing this issue up now at the beginning of a new year to make everyone aware that the Federal Flood Insurance Program is starting to be re-examined and could be facing proposed changes this year. Critics are questioning whether taxpayer money should be used to bail out time and time again the rebuilding of homes in risky areas.
Judith Kildow of the National Ocean Economics Program wrote on the New York Times’ opinion page at the end of November the following: “The flood insurance program is a fiscal time bomb for the government. We should phase out the program, begin thinking strategically about how to shift populations away from the most risky coastal areas, and use the best available science to update the woefully out of date coastal zone risk profiles that government agencies currently rely on to determine damage. We also need to encourage more stringent building codes that take into account the full range of climate risks.”
The oceans are rising and more of us want to live at its feet, is it fair that those of us who can afford this rare privilege be subsided by other taxpayers? If there’s an answer to this question I don’t have it but I can guarantee it’s a question that you’re going to hear a lot more of in the years ahead.
Now that the holidays are over if you’re hearing the patter of hooves it’s probably rain threatening your peace and quiet. Let’s hope our elected officials will forget the naughty and be nice to us in the new year.
