Flooding due to tropical storms andhurricanes has become one of the most common environmental hazards in the U.S.Recently, hurricane Harvey has left southeastern Texas flooded bringingimmediate attention to the National Flood Insurance Program. When privateinsurers realized that flood insurance wasn’t profitable they withdrew from themarket. In 1968, the government joined the market issuing flood insurance tocompensate for the restricted private flood insurance options. A problem thatarises from the National Flood Insurance Program is that by rebuilding theserepetitive loss properties after every flood it encourages people to live inplaces at high risk for flooding. According to theFederal Emergency Management Agency, a property is considered a repetitiveloss property after, “Two or more claims of more than$1,000 were paid by the National Flood Insurance Program (NFIP) within anyrolling ten-year period, since 1978” (FEMA,2005). Because the NFIP encourages peopleto live in vulnerable to flooding areas, these repetitive loss properties haveled to the program being in debt.
If the National Flood Insurance Program was aprivate insurer is would not cover these prone to flooding properties becauseof the enormous amount of money they would lose. In the article, “Harvey damage adds urgency to flood insurance debate”Sylvan Lane states, “The NFIP stayed largely solvent until HurricanesKatrina and Rita in 2005, and Superstorm Sandy in 2012 saddled it withmore than $24 billion in debt. Hurricane Harvey will add billions more in debtto the program” (Lane, S., 2017). There have been more frequent naturaldisasters which have proven that the NFIP’s rates are too low to cover itscosts, driving the program into a deeper economic hole. In the article, “CatastropheEconomies: The National Flood Insurance Program” author Erwann O. Michel-Kerjanstates, “There are about 71,000 currently insured ‘repetitive loss properties,’which represent about only 1.2 percent of the NFIP portfolio but account for 16percent of total claim payments between 1978 and 2008” (Michel-Kerjan, E.
,2010). There is a clear disproportion between the number of repetitive lossproperties and the amount of money they exhaust from the National FloodInsurance Fund. More attention should be brought tothis issue because as mentioned in the article, “Insuring Against the NaturalCatastrophe After Katrina” Spencer M. Taylor states, “FEMA has no choice but toborrow repeatedly from the U.S.
Treasury to pay claims” (Taylor, S., 2006). TheNational Flood Insurance Program turns to the United States Treasury to borrowsmoney to cover their losses, and pays back those interest payments with thetaxes paid by the U.S taxpayer.
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Taxpayers have been paying great amounts ofmoney to keep rebuilding many properties that have been repeatedly flooded. The National Flood InsuranceProgram should buy these repetitive loss properties instead of rebuilding themafter every flood. I suggest this as in most cases it would be cheaper to buythese properties then to keep insuring them, which only increases the program’sdebt. It is not uncommon for homeowners to receive more money to rebuild theirhomes than what their house is actually worth. As stated by William O. Jenkins,Jr. in the source, “Actions to Address Repetitive Loss Properties,” a studyconducted by the U.
S Government Accountability Office, “A 1998 study by theNational Wildlife Federation noted that nearly 1 out of every 10 repetitiveloss homes has had cumulative flood loss claims that exceeded the value of thehouse” (Jenkins, W.O. Jr., 2004).
With the money that the National FloodInsurance pays them, they could relocate to a safer place for them to live,where they don’t constantly have to be worrying about floods and their overallsafety. In the article, “Moving Out of Harm’s Way” author ShivaPolefka provides evidence that validates the policy implication of encouragingthe National Flood insurance to buyout these repetitive loss properties. Hementions the historic flooding along the Mississippi River from 1993 through1995, and how the state of Missouri launched a program to buyout repetitiveloss buildings in the river’s floodplain. Between 1995 and 2008, FEMA and thestate of Missouri invested about $75 million to purchase 4,045 repetitive lossproperties across eight eastern counties. Whether this was the right call wastested from 1999 to 2008, as Missouri faced 14 massive disasters due toflooding. Polefka goes on to state, “Analyzing theperformance of buyouts in 2009, FEMA and Missouri found that for the 885 propertiesfor which there were adequate data, nearly $97 million in losses was avoidedduring those 14 flood disasters, representing a 212 percent return oninvestment for the $44 million of public funds that had been invested in thoseparticular buyouts” (Polefka, S., 2013). In this case, buying these repetitiveloss properties worked out well and should be done in other prone to floodingareas as well.
TheNational Flood Insurance Program buying these repetitive loss properties wouldcreate a more sustainable future for our country. Not only would it save theU.S federal government money, but perhaps private flood insurers would join themarket again as these repetitive loss properties would not be the reason thatthey lose money. Although I acknowledge that there are many factors that wouldhave to change for private insurers to take the risk of insuring homeowners,such as having the NFIP charge full risk rates to balance the prices privateinsurers would charge, the federal government can begin with purchasing thesehigh risk to flooding properties.
By encouraging the private sector of theeconomy to enter the market individual property owners would pay for theirrisks of flood loss, not U.S tax payers. If this problem continues to beunaddressed, the potential impact is devastating. It is almost certain that theareas where these repetitive loss properties are located will be flooded again,putting the lives of the people living there in extreme harm. These peoplecontinue to live in constant fear that the next flood will be worse than thelast. If these repetitive loss properties are bought, people’s lives are lessat risk.
