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The Rising Tide of Flood Insurance Rates

If you live anywhere near the U.S. coast, doubtless you’ve heard about how people’s (or possibly your) flood insurance rates are poised to jump 1,000 percent or more in the coming weeks. Once-affordable rates, like say $500 a year for a cozy cottage a few blocks from the beach, are now chum for the monster bills headed homeowners’ ways—$5,000, $10,000, or even $20,000 each year. Certainly more than most folks in the 99 percent can pay.

You may think that Superstorm Sandy was the straw that broke the camel’s back, but the new policy is the result of the Biggert–Waters National Flood Insurance Act of 2012, which Congress passed in a hell-hath-frozen-over moment of bipartisanship several months before the storm hit. Named for Reps. Judy Biggert (R-IL; no longer in office) and Maxine Waters (D-CA), the act is an attempt to erase the $24 billion in debt held by the National Flood Insurance Program (NFIP).

Why is the National Flood Insurance Program $24 billion debt? It all started back in 1968 when the program was enacted. Just prior to that, insurance companies couldn’t figure out how to make a profit on homeowners flood insurance, so they stopped offering it. The federal government stepped in to lend a hand and offered homeowners massively subsidized flood insurance. When claims needed to be paid out, the NFIP simply borrowed the money from other programs. In case of disaster, many homeowners received money to rebuild from both the NFIP and the Federal Emergency Management Agency (FEMA). A building boom ensued, fostered by cheap insurance and great views.

Over 40 years later and after the storms of the past dozen years—Katrina, Sandy, Ike, Wilma, Ivan, Irene, Charley, Rita, and Frances—FEMA (which runs the NFIP) decided it would be a good idea to update their flood maps. And many people whose homes were built safely outside the 1960s flood zones found themselves smack dab in the 21st century danger zone. Some were told to raise their houses up another six feet (at a cost of, oh, about $150,000) or pay the new, stratospheric insurance rates. For her part, Waters says that she “did not intend for these types of outrageous premiums to occur for any homeowner.”

That may be true, but it looks like we are now facing the consequences of development in areas that may have been better left untouched. According to a brief from the Institute for Policy Integrity at the New York University School of Law, one valuation study reported that

undeveloped coastal wetlands are typically worth several thousand dollars per hectare in annual ecosystem benefits. Development of these areas can interfere with and diminish their environmental benefits, but the private price of development rarely reflects the cost of those lost ecosystem services. To the contrary, by shifting the insurance risks to the taxpayers and reducing the long-term private costs of building in floodplains, the NFIP encourages development in these ecological hot zones. Such development will inevitably trigger environmental damage.

If only we knew then what we know now. Instead, we’re left with a situation in which a $250,000 home in Florida (the state hardest hit by the new rules) may cost its owner $25,000 annually in flood insurance premiums. But the hew and cry got the coastal homeowners an 11th-hour reprieve that will enable FEMA to take a four-year look at the matter and get back to them. An optimist might throw another steak on the grill and crack open a beer. But the realists are more likely to have visions of Doppler-enhanced category 3 and 4 hurricanes floating in their heads. To all but the most foolhardy it seems certain the waters are rising, and that carefully considered legislation may not be the most effective protection against Mother Nature.

Kathy Wilson Peacock is a writer, editor, nature lover, and flaneur of the zeitgeist. She favors science over superstition and believes that knowledge is the best super power. Favorite secret weapon: A library card.

Posted on: November 19, 2013, 6:00 am Category: Current Issues Tagged with: , , , , , , , , , ,

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