Harvey could cost flood insurers $11 billion, but funds are running out

Commentary: Crop Insurance vs Flood Insurance

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Wright said uninsured homeowners around the country should learn from what is happening in Houston and other flood-ravaged parts of the country and seriously weigh whether they should buy a policy. If homeowners in non-flood areas do not purchase flood insurance their lower experience can not offset the higher risk of those insureds in flood areas. There have been thousands of cars that have flooded in the Houston area as well as Florida.

"Your torture starts now unless there is reform of the National Flood Insurance Program", Caputo said at an news conference in the corner of a hallway inside the Longworth House Office Building. "We should not be losing money every year on flood insurance".

Florida has undergone a steep decline in flood insurance policies since 2012, even in areas more likely to flood due to potentially devastating storm surge, according to the Associated Press.

According to a 2016 poll from the Insurance Information Institute, 12 percent of American homeowners had a primary flood insurance policy, which was a slight drop from 14 percent in 2015.

"People don't have natural disaster insurance with houses on fault lines", he said. Since 2012, the number of properties covered under the flood insurance program has dropped 10 percent, from almost 5.5 million to about 4.9 million. Reinsurance policies purchased by FEMA could cover about $1 billion, a small fraction of what the program will need. One GAO report from 1976 found that the FIA lacked an "effective system" to insure that local communities took the necessary steps to mitigate flood risks by restricting development and imposing zoning regulations.

The chance of being swamped deters some people, but the government offers flood insurance to pay for repairing and rebuilding.

The group says thousands of homeowners affected by Hurricane Sandy, one of the costliest hurricanes in US history, still haven't been paid what they're owed five years after the storm ravaged the East Coast.

The insurance and reinsurance losses are expected to be just a fraction of the total economic loss, which RMS estimates as between $70 billion and $90 billion.

In the short term, Congress will have to increase the National Flood Insurance Program's borrowing authority for it to pay the claims that will result from Harvey and other storms this year.

"Flood insurance costs vary, starting around $35 per month and range up to $100 per month", said Dan Green, founder of financial education website Growella.

When a mortgage is issued, the lender is supposed to check whether the home is in a flood plain, and if so, it should require the owner to acquire insurance.

What can be done to fix the program?

That's especially true, he said, because flood insurance for coastal properties generally covers those with high incomes who in many cases have the insurance to cover a second home, or a house used as a rental property.

The New Deal enshrined this idea on an unprecedented scale, making the idea of disaster relief central to the modern welfare state. It is to help them rebuild.

Getting the government out of the flood insurance business and having insurance companies determine actuarially sound premiums is the only way for homeowners, businesses, and builders to know the real risk they are assuming.

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