US flood in­sur­ance pool sinks into debt

The Columbus Dispatch - - Not To Be Missed - By Jessica Wehrman

WASH­ING­TON — Even be­fore Hur­ri­canes Har­vey and Irma drenched Texas and Florida, the na­tion’s fed­eral flood in­sur­ance pro­gram was drown­ing in debt.

Now, un­less Congress votes to ex­tend the pro­gram by Dec. 8, home­own­ers through­out the coun­try — in­clud­ing in Ohio — face un­cer­tainty, with no new poli­cies is­sued un­til it’s ex­tended. That could send real es­tate into a tail­spin, as home­own­ers in flood zones are re­quired to buy the in­sur­ance in or­der to re­ceive a fed­er­ally backed loan.

“The pro­gram was de­signed to be dys­func­tional,” said Di­ane Katz of the con­ser­va­tive Her­itage Foun­da­tion. “Right from the start it was go­ing to be a loser, be­cause if you don’t have peo­ple pay­ing for the risk that they face, then they’re go­ing to take more risk, and when they do, it’s go­ing to cost tax­pay­ers more.”

The Na­tional Flood In­sur­ance Pro­gram, es­tab­lished in 1968 in the af­ter­math of Hur­ri­cane Betsy and other dis­as­ters, was cre­ated be­cause flood in­sur­ance was too costly, and in­sur­ers were flee­ing the mar­ket. But nearly 50 years later, the pro­gram is nearly $25 bil­lion in the hole even be­fore this year’s hur­ri­canes.

The prob­lem is this, crit­ics say: Only those in ar­eas at high risk of flood­ing are re­quired to get the fed­eral poli­cies, and those who do buy them of­ten get poli­cies sub­si­dized by the tax­payer. The very premise of the pro­gram, they say, en­cour­ages peo­ple — some­times very wealthy peo­ple — to build wa­ter­front homes at high risk of flood­ing by not make them pay the true price of the high risk they face.

And the pool it­self is full of risk, be­cause those at lower risk of flood­ing largely avoid buy­ing the prod­uct. A re­port by the Pew Char­i­ta­ble Trusts found that as of 2016, 14,000 prop­er­ties in Florida had re­peat­edly flooded, only to be bailed out time and again by fed­eral flood in­sur­ance.

Congress ex­tended the flood in­sur­ance pro­gram in early Septem­ber as part of a short-term deal that also cov­ered the fed­eral bud­get and the debt ceil­ing, extending the pro­gram’s au­tho­riza­tion through Dec. 8. But by the time that pro­gram ex­pires, an­a­lysts say, Congress will have maxed out the $30.4 bil­lion debt limit that the pro­gram now has.

“We don’t want tax­pay­ers to sub­si­dize peo­ple liv­ing in ar­eas that are flood-prone,” said Sen. Sher­rod Brown, D-Ohio, who ad­vo­cates bet­ter map­ping to truly re­flect the flood zones. “But we have to do that with­out jack­ing up peo­ple’s rates and mak­ing it un­af­ford­able. It’s a tough line to walk.”

He said that while every­one is in­ter­ested in help­ing those who have suf­fered from a “ter­ri­ble tragedy, ... we shouldn’t sub­si­dize other parts of the coun­try so peo­ple can live in nice beach­front homes.”

Ar­eas that rely on flood in­sur­ance say they need the prod­uct to sur­vive.

“Where we’re from in south Louisiana. it’s just too im­por­tant for us eco­nom­i­cally,” said Caitlin Berni, vice pres­i­dent of pol­icy and com­mu­ni­ca­tions for Greater New Or­leans Inc., a re­gional eco­nomic de­vel­op­ment or­ga­ni­za­tion. “We need af­ford­able flood in­sur­ance.”

She ar­gues that the cur­rent pro­gram’s prob­lems can be ex­plained in one word: Ka­t­rina. In the af­ter­math of that storm and other 2005 hur­ri­canes, the govern­ment had to bor­row $17.5 bil­lion to set­tle flood­ing claims.

But that flood­ing, she said, was caused by the fail­ure of the city’s levee sys­tem — not be­cause of the hur­ri­cane.

Fed­eral flood in­sur­ance, she said, “was never de­signed to in­sure against the fail­ure of fed­eral in­fra­struc­ture.”

While the pro­gram over­whelm­ingly ben­e­fits the Gulf states of Florida, Texas and Louisiana, Ohio had 34,328 flood poli­cies in force statewide as of June 30, with most of those poli­cies — 1,318 — in un­in­cor­po­rated parts of Ot­tawa County, which bor­ders Lake Erie.

Franklin County’s un­in­cor­po­rated sec­tions had 750 poli­cies while ones in Colum­bus had 995. Toledo and un­in­cor­po­rated Lu­cas County had 747 and 726 re­spec­tively, and Cleve­land, on the shore of Lake Erie, had only 170 poli­cies.

In all, Ohio’s poli­cies in­sure about $6.3 bil­lion worth of loss — far less than in Florida, about $423 bil­lion; Louisiana, al­most $125 bil­lion; and Texas, $161 bil­lion.

Ac­cord­ing to a study by the Pew Char­i­ta­ble Trusts, poli­cies in Florida ac­count for about 35 per­cent of the Na­tional Flood In­sur­ance to­tal. Texas has 12 per­cent and Louisiana has 10 per­cent.

Mean­while, the vast ma­jor­ity of U.S. home­own­ers go with­out. Ac­cord­ing to a 2016 poll by the In­sur­ance In­for­ma­tion In­sti­tute, only 12 per­cent of U.S. home­own­ers have a flood in­sur­ance pol­icy. In the Mid­west, only 8 per­cent of home­own­ers do.

Crit­ics say that a bet­ter­de­signed flood in­sur­ance pro­gram charges ap­pro­pri­ately for those at risk; pri­or­i­tizes sub­si­dies for the poor, who likely need help with flood dam­age more than the wealthy; en­cour­ages peo­ple to build in ways that take into ac­count the flood zones; and en­cour­ages pri­vate in­sur­ance to help meet needs.

In some ways, they say, the cur­rent pro­gram re­wards fool­har­di­ness: If you know your prop­erty is in an area at high risk for flood­ing, they say, the very least you can do is build in a way that take that into ac­count.

“We keep re­build­ing the same stuff in the same places in the same ways,” said Ethan Han­del­man, vice pres­i­dent of pol­icy and ad­vo­cacy for the Na­tional Hous­ing Con­fer­ence. “We’re not mit­i­gat­ing, not pre­par­ing for risks we know are com­ing.”

Those who do have the in­sur­ance tend to do bet­ter: Dur­ing the Ba­ton Rouge floods of 2016, the av­er­age home­owner with flood in­sur­ance re­ceived $86,500. The av­er­age home­owner with­out flood in­sur­ance re­ceived $9,100 in fed­eral dis­as­ter as­sis­tance, ac­cord­ing to Steve El­lis, vice pres­i­dent of Tax­pay­ers for Com­mon Sense.

“If you do flood and you don’t have flood in­sur­ance, you’re in a re­ally bad way,” El­lis said.

[PABLO MARTINEZ MON­SI­VAIS/THE AS­SO­CI­ATED PRESS]

Theresa Lindsey, left, dressed as Snow White, helps Ti­mothy Sch­lar­mann, dressed as Un­cle Sam, as they join other jug­ga­los on the Wash­ing­ton Mall on Satur­day amid three sep­a­rate demon­stra­tions. While oth­ers ral­lied for Trump and oth­ers protested Rus­sian in­volve­ment in the 2016 elec­tions, sup­port­ers of the rap group In­sane Clown Posse ral­lied to de­mand that the FBI re­scind its clas­si­fi­ca­tion of their fan group, known as the jug­ga­los, as a “loosely or­ga­nized hy­brid gang.”

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