Economy

FEMA Flood Insurance Program Nearly $25 Billion in Debt

FEMA Flood Insurance Program Nearly $25 Billion in Debt”

In percentage terms, the drop was even more dramatic in certain sections of the county: In Pasadena, just southeast of Houston, policies were down almost 20 per cent. Baytown, east of Houston, saw a 22 per cent drop. The center for the problem is South Florida, where Spartz lives.

Standard homeowners insurance policies cover damage from the high winds that are associated with a hurricane, but they don't cover damage from rain or flood waters.

"I was talking to my husband and I said that if something like Harvey happens here, I don't want to be on the hook", said Spartz, who relocated from Cincinnati.

What's driving the drop in policies?

If homeowners don't know that claims were filed before they purchased the home and file one that throws the property into the high-risk category, their premiums could soar. It has less than $2 billion in cash on hand, with only $6 billion more left in borrowing capacity as it prepares for the claims that will be filed due to Harvey.

Consumer Federation of America director of insurance Robert Hunter estimates the damage from Harvey is at least $35 billion, around what Hurricane Katrina cost after it hit the Gulf Coast of the U.S. in 2005, according to AP.

So it's very easy to see the NFIP flood loss from hurricane Harvey exceeding $4 billion and getting well on the way towards the $8 billion upper exhaustion limit for the Program's reinsurance arrangements.

The NFIP insures about 5.5 million USA homes, the majority of which are in Texas and Florida.

Flooding is the most common natural disaster in IL, with more than 90 percent of declared disasters. In Spartz's home of Broward County, it's only 13 percent. There were roughly 1.75 million housing units in Harris County, but that includes apartment and condominium buildings, making it an imperfect figure to try to calculate what overall percentage of families are covered by flood insurance. In New Orleans, it's 46 percent. Over the same period, the number of flood policies across the USA dropped 10 per cent, to 4.9 million. Congress is likely to reauthorize the program before then because failure to do so would disrupt coastal real estate markets.

The NFIP's reinsurance program is backed by 25 reinsurers from around the world, with a significant participation from the likes of the major four European players, as well as many Bermudian reinsurance firms. The Texas lawmaker said that most disagreements have been worked out and that he is not in favor of Congress passing a temporary extension of the current flood insurance program because doing so would hurt taxpayers. "I don't think people focused on what that meant". A spending bill enacted after Superstorm Sandy authorized the program to borrow up to $30.4 billion. It's about communities galvanizing around it. Some may be forced to sell, if they can, and leave their communities. "When they are at less risk, their premiums are cheaper", Wright told the AP. In addition, those homeowners in a designated FEMA flood zone will not be able to find financing without flood insurance.

Most of the Houston area falls outside those most vulnerable zones, and many homeowners who aren't forced to have coverage have made a decision to do without.

"The banks are not watching the hen house", said Loretta Worters, a spokeswoman with the Insurance Information Institute. They weren't even in what FEMA considered to be "flood zones".

"Are you going to renew the program and if you do what's my premium going to be?" said Sen. As Harvey proved, a lower-risk neighborhood is not a no-risk neighborhood. While the size and scope of the Houston disaster is in some ways unparalleled, there are flood risks all over the country - in every state, including California, which nearly had a dam burst previous year, Santos said. Kyle Cutrer didn't get flood insurance when he purchased a house in Central last summer, outside the flood zone. The deluge overtopped rivers and damaged or destroyed tens of thousands of homes, inundating many neighborhoods that had never seen such catastrophic flooding. He was lucky. The water only reached 10 feet from his door. He used about $16,000 from FEMA to pay for some repairs; he paid the rest himself.

The NFIP said that there is a 17.2% chance of a flood loss event severe enough to trigger its reinsurance in 2017.

Still the number of flood policies in effect was 593,115.



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