Tag: flood insurance

The Feds Shouldn’t Subsidize Fancy, Risky Beach Houses

Mary Pat Campbell

Link: https://reason.com/2024/01/10/the-feds-shouldnt-subsidize-fancy-risky-beach-houses/

Graphic:

Excerpt:

Sen. John Kennedy (R–La.) is upset because Sen. Rand Paul (R–Ky.) wants to limit federal flood insurance.

But Paul is right. In my new video, Paul says, “[It] shouldn’t be for rich people.”

That should be obvious. Actually, federal flood insurance shouldn’t be for anyone. Government has no business offering it. That’s a job for the insurance business.

Of course, when actual insurance businesses, with their own money on the line, checked out what some people wanted them to insure, they said, “Heck no! If you build in a dangerous place, risk your own money!”

Politically connected homeowners who own property on the edges of rivers and oceans didn’t like that. They whined to congressmen, crying, “We can’t get insurance! Do something!”

Craven politicians obliged. Bureaucrats at the Federal Emergency Management Agency even claim they have to issue government insurance because, “There weren’t many affordable options for private flood insurance, especially for people living in high-risk places.”

But that’s the point! A valuable function of private insurance is to warn people away from high-risk places.

Author(s): John Stossel

Publication Date: 10 Jan 2024

Publication Site: Reason

Event: The Private Market for Flood Insurance

Mary Pat Campbell

Link: https://www.rstreet.org/2022/07/20/event-the-private-market-for-flood-insurance/

Video:

Excerpt:

The private market for flood insurance in the United States measures approximately $300 million in annual premium. This is less than 10 percent of the $3.7 billion in flood insurance premium written by the federal government’s National Flood Insurance Program (NFIP). Private insurers offering flood insurance are not operating on the same playing field because many NFIP policies are subsidized and underpriced. The creativity of private insurers, guided by the dynamics of a free and competitive market, will eventually drive out inefficiency and false price signals, and make available to homeowners and businesses the flood insurance they need at the right cost.

We invite you to an online discussion examining the obstacles and opportunities for private insurers featuring flood insurance entrepreneur Trevor Burgess, and R Street’s Jerry Theodorou and Caroline Melear.

Author(s): Jerry Theodorou, Trevor Burgess, Caroline Melear

Publication Date: 20 Jul 2022

Publication Site: R Street

Flood-Prone Homes Could Lose Federal Insurance Under FEMA Plan

Mary Pat Campbell

Link: https://www.wsj.com/articles/fema-urges-congress-to-drop-flood-insurance-for-highest-risk-areas-11655384400

Excerpt:

Mr. Toomey asked Jerry Theodorou of the R Street Institute, a conservative-leaning Washington-based think tank, how seriously Congress should look at paying repetitive loss claims. “Indeed, this is a very serious problem,” Mr. Theodorou said. “The numbers speak for themselves, to have such a small percentage of policyholders accounting for close to 40% of the claims dollars paid.”

The flood insurance program — which is the main provider of flood coverage in the U.S. and has issued more than five million policies — has paid out more money to property owners and other expenses than it has collected in premiums from policyholders since Congress created it in 1968. It collects about $4.6 billion in annual revenue from policyholders in premiums, fees and other charges, according to the Congressional Research Service.

Flooding ranks as the country’s most common natural disaster. Scientists predict floods will happen more frequently in neighborhoods that face new risk from rising sea levels and extreme rainstorms due to climate change.

Author(s): Katy Stech Ferek

Publication Date: 16 June 2022

Publication Site: Wall Street Journal

Jerry Theodorou on Natural Disasters and Insurance

Mary Pat Campbell

Link:https://www.c-span.org/video/?514314-3/washington-journal-jerry-theodorou-discusses-natural-disasters-insurance

Excerpt: [transcript from closed captioning]

Jerry Theodorou
IT IS HARD TO CALCULATE. THE INSURANCE INDUSTRY WAS FACED WITH MASSIVE FLOOD LOSSES BUT FOUND THAT IT DID NOT HAVE THE DATA TO PRICE IT ACCURATELY. IT STARTED REDUCING AND EXCLUDING FLOOD FROM STANDARD INSURANCE POLICIES AND THE GOVERNMENT STEPPED IN TO CREATE THE PROGRAM. TO PROVIDE SOME LEVEL OF FLOOD INSURANCE. THERE IS AN INHERENT TENSION IN THE PROGRAM BECAUSE IT HAS TWO GOALS IN CONTENTION WITH EACH OTHER. THE GOAL TO PROVIDE AFFORDABLE FLOOD INSURANCE AND SOME DEGREE OF FISCAL SOUNDNESS. THEY ARE PAYING ABOUT $400 BILLION IN INTEREST, WHICH IS A BURDEN, SO IF WE FOCUS STRICTLY ON AFFORDABILITY, YOU WILL HAVE UNDERPRICED INSURANCE, NOT PRICED ACCORDING TO THE ACTUAL VOLUME. THIS IS WHAT IS HAPPENING NOW WITH LARGELY IMPACT — OVERPRICED INSURANCE. FOCUSING ON FISCAL SOUNDNESS, YOU WILL HAVE THOSE EXPOSED. IT IS A LITTLE BIT OF A BALANCE. DO YOU WANT FISCAL SOUNDNESS? PROBABLY A LITTLE BIT OF BOTH, WHICH IS MY NEXT MONTH, OCTOBER 1, THE NEW BEATING WILL BE INTRODUCED TO MAKE IT MAKE THE PRICING AND THE COST OF FLOOD INSURANCE MORE APPROPRIATE FOR THE LEVEL OF RISK. IT IS EITHER OR. IF YOU LIVE IN A FLOOD ZONE, YOU PAY HIGHER PREMIUMS. IT IS NOT BLACK-AND-WHITE BECAUSE THERE IS A SPECTRUM FOR THE DEGREE OF RISK. IT WILL INTRODUCE MORE VARIABLES SO THAT IT IS MORE APPROPRIATELY CORRELATED WITH THE LEVEL OF RISK.

Author(s): Jerry Theodorou, John McArdle

Publication Date: 5 Sept 2021

Publication Site: C-SPAN, Washington Journal

Flood-Threat Assessment Finds Danger Goes Far Beyond U.S. Homes

Mary Pat Campbell

Link:https://www.bloomberg.com/graphics/2021-flood-risk-critical-infrastructure/

Graphic:

Excerpt:

Nearly a quarter of U.S. critical infrastructure—utilities, airports, police stations and more—is at risk of being inundated by flooding, according to a new report by First Street Foundation, a Brooklyn nonprofit dedicated to making climate risk more visible to the public.

Roughly 14% of Americans’ properties face direct risk from major storms, but the study shows danger extends far from those property lines.

The authors say the report provides the first holistic understanding of flood risk beyond individual property level. In addition to critical infrastructure, the report assesses commercial buildings, millions of miles of roads and socially important institutions such as schools and museums.

“Even if your home is far from the risk of flooding or forest fires, you may not so easily escape the systemic impacts from vulnerable critical infrastructure that sometimes extends hundreds of miles,” said Jesse Keenan, a climate-change and real-estate expert at Tulane University in New Orleans.

Author(s): Leslie Kaufman, Rachael Dottle, Mira Rojanasakul

Publication Date: 11 October 2021

Publication Site: Bloomberg

The flood insurance debate returns. Here’s what to expect

Mary Pat Campbell

Link: https://www.eenews.net/stories/1063731009

Excerpt:

The most comprehensive proposal being floated so far is one from House Financial Services Chairwoman Maxine Waters (D-Calif.).

That discussion draft would extend the program for an additional five years and limit the government’s ability to raise the price of flood insurance amid growing concerns about affordability (E&E Daily, April 14). Current authorization for the National Flood Insurance Program (NFIP) is set to expire in five months.

….

Jerry Theodorou, director of the finance, insurance and trade program at the R Street Institute, said subsidies mask the real costs of building and living in flood-prone areas and that the Peters-Barr bill would ensure that policyholders aren’t “undercharged.”

Theodorou said the Waters bill instead would kick the can down the road, and he criticized the measure for seeking to cancel the program’s historic $20.5 billion debt.

Author(s): Hannah Northey

Publication Date: 27 April 2021

Publication Site: E&E News

Risk Rating 2.0

Mary Pat Campbell

Link: https://www.fema.gov/flood-insurance/work-with-nfip/risk-rating

Excerpt:

The National Flood Insurance Program (NFIP) is redesigning its risk rating by leveraging industry best practices and current technology, FEMA will deliver rates that are fair, make sense, are easier to understand and better reflect a property’s unique flood risk. FEMA calls this effort Risk Rating 2.0.

alert – warning
Risk Rating 2.0 implementation has been deferred To October 1, 2021.

While the agency initially announced that new rates for all single-family homes would go into effect nationwide on October 1, 2020, some additional time is required to broaden the agency’s analyses of the proposed rating structure across its entire book of business, to include its relationship to communities behind levees. Therefore, FEMA decided to adjust implementation of Risk Rating 2.0 by one year to October 1, 2021.

Date Accessed: 4 March 2021

Publication Site: FEMA