he Federal Flood Insurance Program was well under water prior to the recent barrage of hurricanes this season. NFIP started the season already owning the U.S. Treasury 24 billion dollars. This debt, in part, is due to repeated flood claims by homeowners who have received as many as 22 separate payouts to repair flood damage in some cases.
Between 1979 and 2015, government records show the federal flood insurance program paid out more than $1.8 million to rebuild the same house — a property which is worth $600,000 to $800,000 before Harvey hit late last month.
Homes with repetitive flood losses account for just 2% of the roughly 1.5 million properties that currently have flood insurance. But such properties have accounted for about 30% of flood claims paid over the program’s history.
The National Flood Insurance Program (NFIP) was created in 1968. The program was established to provide property owners insurance protection against losses from flooding. Well intended, however poorly executed and doomed to be in debt from its conception due to outdated flood maps and extremely low premiums in comparisons to actuarial risk-based models.
Congress attempted to correct this problem in 2012 when it passed the Biggert-Waters Flood Act. A core principle of Biggert-Waters was to change premiums to match actuarial risk-based models that reflected the expected losses and the real risk of flooding. Including the removal of discounts to many policies which were being sold below actual actuarial risk targets and eliminating "grandfathering" of older rates.
This change didn't last long - In 2014, Congress passed the Homeowner Flood Insurance Affordability Act. This bill added subsidized premiums and reinstated grandfathering of lower rates; effectively delaying the increases in flood insurance premiums.
By adding the cost of repeated payouts to homeowners on top of the base issue troubling NFIP (low premiums), the result is a perfect storm.
Nearly half of frequently flooded properties in the U.S. have received more in total damage payments than the flood program’s estimate of what the homes are worth, according to the group’s calculations.
“Anyone looking at this would say there are perverse incentives for staying on the floodplain,” said Nicholas Pinter, a geology professor and associate director of the Center for Watershed Sciences at the University of California, Davis, who has analyzed repeatedly flooded properties.
The FEMA Flood Map Service Center (MSC) is the official online location to find all flood hazard mapping products created under the National Flood Insurance Program (NFIP), including your community's flood map, called a Flood Insurance Rate Map (FIRM).