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Flood Insurance, Already Fragile, Faces New Stress
There are some parallels with health 'insurance' -- a model where you have businesses trying to bet against something that's actually guaranteed to happen to a lot of people - you just don't know exactly when, or how.
Early estimates suggest that Hurricane Sandy will rank as the nation’s second-worst storm for claims paid out by the National Flood Insurance Program. With 115,000 new claims submitted and thousands more being filed each day, the cost could reach $7 billion at a time when the program is allowed, by law, to add only an additional $3 billion to its onerous debt.
Congress, just this summer, overhauled the flawed program by allowing large increases in premiums paid by vacation home owners and those repeatedly hit by floods. But critics say taxpayer money should not be used to bail it out again — essentially subsidizing the rebuilding of homes in risky areas — without Congress’ mandating even more radical changes.
“We are now just throwing money to support something that is going to end up creating more victims and costing more money in the future,” Representative Earl Blumenauer, Democrat of Oregon, said of the program, which insures 5.7 million homes nationwide near coasts or flood-prone rivers.
Even with the new rules, critics argue, it will be many years, if ever, before many homeowners are required to pay premiums that accurately reflect the market cost of the coverage. Some communities have long resisted imposing more appropriate building codes to prevent damage, putting the program at further risk of devastating losses when storms like Hurricane Sandy hit. And despite some efforts in recent years, many of the flood maps the program relies on are out of date — which can have expensive, and even deadly, consequences in this era of rising sea levels if homeowners are not cognizant of the risks they face.
http://www.nytimes.com/2012/11/13/nyregion/federal-flood-insurance-program-faces-new-stress.html
Congress, just this summer, overhauled the flawed program by allowing large increases in premiums paid by vacation home owners and those repeatedly hit by floods. But critics say taxpayer money should not be used to bail it out again — essentially subsidizing the rebuilding of homes in risky areas — without Congress’ mandating even more radical changes.
“We are now just throwing money to support something that is going to end up creating more victims and costing more money in the future,” Representative Earl Blumenauer, Democrat of Oregon, said of the program, which insures 5.7 million homes nationwide near coasts or flood-prone rivers.
Even with the new rules, critics argue, it will be many years, if ever, before many homeowners are required to pay premiums that accurately reflect the market cost of the coverage. Some communities have long resisted imposing more appropriate building codes to prevent damage, putting the program at further risk of devastating losses when storms like Hurricane Sandy hit. And despite some efforts in recent years, many of the flood maps the program relies on are out of date — which can have expensive, and even deadly, consequences in this era of rising sea levels if homeowners are not cognizant of the risks they face.
http://www.nytimes.com/2012/11/13/nyregion/federal-flood-insurance-program-faces-new-stress.html