A few years ago, back in 2017, CoreLogic estimated that roughly 70% of the flooding damage incurred from Hurricane Harvey was uninsured. Sadly, according to CoreLogic’s most recent report, not much has changed. It would appear that homeowners are still often completely unaware of their increased risk and exposure to flooding—a lack of awareness that poses a real threat to mortgages and homeownership.
CoreLogic’s "Finding Opportunities in Insuring Flood" report [1] analyzes underinsured flood zones in the U.S. along the Atlantic and Gulf Coast regions and Mississippi River basin. It’s the finding from this analysis that were just released from the experts.
Highlights from the report include many surprising facts, including that homes outside designated Special Flood Hazard Areas (SFHAs) along the Atlantic and Gulf Coast are at risk of a staggering $218 billion in uninsured damage exposure if impacted by a Category 3 to 5 hurricane. For those homes located outside the SFHA along the Mississippi River, these abodes are at risk of a less—but still substantial—$31 billion in uninsured inland flood damage.
Another illuminating fact? Even those homes inside the SFHA in both of the above-mentioned regions (all of which already have coverage from the mandatory basic flood insurance)–are at risk of underinsurance due to the NFIP's coverage cap of $250,000. Once this cap is met, homeowners are on their own to cover damages, which for most homes in the region, far exceed this maximum coverage sum.
The CoreLogic analysis showed that not only are uninsured damages from catastrophes devastating to homeowners and insurance carriers, but it also highlighted the fact that they can also pose a real threat to the mortgage industry.
Dr. Frank Nothaft, Chief Economist at CoreLogic, elaborated on this threat: “If a hurricane causes significant storm surge damage during a time when mortgage delinquencies are already high, this could result in additional issues for lenders and insurers – and ultimately, delay economic recovery for impacted communities. For example, our analysis shows that three months after 2018’s Hurricane Florence made landfall, serious delinquency rates had doubled in major metros affected by the storm."