When Hurricane Harvey [1] hit the Houston area in August 2017, the storm caused $125 billion in damage, damaged 203,000 homes, and destroyed 12,700. To make matters worse, FEMA [2] reported that 80 percent of all households affected by Harvey didn’t have flood insurance to help mitigate the financial impact of the disaster. Moreover, according to a new analysis [3] by the AP, “fewer than one in five properties in high-risk flood zones had coverage.” In the months since, more affected homeowners have secured flood insurance, but will that trend last?
FEMA reports that the number of Texas flood insurance [4] policies increased by 18 percent between July 2017 and May 2018. In Harris County, that increase was 23 percent, and Fort Bend County increased by a whopping 54 percent. Houston now stands as the city with the most properties insured against floods, having surpassed the previous record-holder, Miami.
However, past events suggest this post-disaster increase is not likely to translate into a long-term trend. AP reports that flood insurance policies in Louisiana jumped by more than 100,000 after Hurricanes Katrina and Rita in 2005, but then began to drop again. “The year after Superstorm Sandy in 2012, flood insurance policies increased by 2 percent in New Jersey and 12.5 percent in New York,” according to the AP. “But since the end of 2013, policies have dropped by 7.4 percent in New Jersey and 8 percent in New York.”
Standard homeowners and renters insurance does not typically cover [5] flood damage, and while some lenders require flood insurance for homebuyers, it’s not a requirement for many properties that fall outside of designated flood zones. Unfortunately, being outside of a designated flood zone is no guarantee that a home is safe from flooding, especially when a natural disaster like Harvey is concerned. In fact, FEMA reports that more than 20 percent of flood claims come from properties outside high-risk flood zones [6]. Even so, convincing homeowners to pay the extra expense for flood insurance that isn’t mandatory is no easy task.
FEMA has set a goal of trying to double the number of structures covered by flood insurance from 4 million to 8 million by 2022. However, FEMA’s National Flood Insurance Program (NFIP) has more pressing problems that could stand in the way of that longshot goal—funding. This week the Senate voted [7] 86-12 to extend the NFIP until November 30, on the very day it was otherwise set to expire. But a four-month extension doesn't provide a long-term solution to the flood insurance issue.
The NFIP provides flood coverage for more than 22,000 American communities and was originally set to expire last fall. Although the House of Representatives passed a reform bill entitled the 21st Century Flood Reform Act, reform for the program then stalled in the Senate. Since then, the Senate has okayed a series of extensions for the program. Following the devastating effects of Hurricanes Harvey, Irma, Jose, and Maria, the NFIP was—and still is—deeply in debt. Congress has already agreed to forgive $16 billion in debt from the program.
“Affordable and readily available flood insurance is vital for the more than 20,000 communities across the United States that depend on the National Flood Insurance Program,” said Rebeca Romero Rainey, President and CEO of the Independent Community Bankers of America [8]. “A long-term reauthorization of the NFIP is needed to ensure coverage remains available to affected communities and to avoid further disruptions to the market.”