Most Florida homes in Hurricane Ian’s path lack flood insurance, posing a major challenge to rebuilding efforts, new data shows.
In counties whose residents have been told to evacuate, only 18.5 percent of homes have coverage through the National Flood Insurance Program, according to Milliman, an actuarial firm that works with the program.
Within those counties, homes within the government-designated floodplain, the area most prone to flooding, 47.3 percent of homes have flood insurance, Milliman found. In areas outside the floodplain, much of which is likely still damaged by rain or Ian’s storm surge, only about 9.4 percent of homes have flood coverage.
The small proportion of households with flood insurance demonstrates the challenges posed by the country’s approach to rebuilding after disasters: a mix of public and private financing that is under pressure as climate change makes such disasters more frequent. and severe.
If people cannot afford to rebuild their homes after disasters, the financial cost of climate change to households and communities could become ruinous.
Regular homeowners insurance policies typically don’t pay for flood damage, which is why the Federal Emergency Management Agency offers flood insurance. Coverage is expensive, with average premiums about $1,000 a year, according to data from Forbes. But without it, flood-affected homeowners are forced to rely on savings, loans or charity to rebuild.
Low federal flood insurance acceptance rates in areas affected by Hurricane Ian mean those communities will take longer to rebuild, jeopardizing their economies and prolonging suffering, experts said.
“These people, many of them, believe their homeowners insurance policy will cover them,” said Nancy Watkins, director and consulting actuary at Milliman. “Or they might think federal disaster aid is going to come through and get them back.”
But federal disaster assistance is less generous than many people assume.
FEMA offers limited emergency assistance to uninsured homeowners, such as paying for temporary housing in a hotel, motel, or mobile home, or performing basic repairs to make a home livable.
But FEMA typically won’t pay for home reconstruction, as The New York Times reported in July. Aid is limited to less than $40,000, a fraction of what it costs to rebuild.
Congress can decide to provide extra money for disaster survivors, usually by giving funds to the US Department of Housing and Urban Development, which can then set up what it calls disaster recovery grants to states. States can then use that money to pay for home reconstruction.
But Congress has no guidelines for determining which disasters deserve that additional funding, and whether it provides the funding depends as much on the political clout of a state’s congressional delegation as the actual level of damage. Even when Congress makes extra money available, it often takes years before the funds reach homeowners.
Disaster survivors who don’t have insurance but can’t wait years hoping for help can apply for help from the Small Business Administration, another federal agency that plays a role in disaster recovery. The agency makes loans to renters, homeowners, businesses, and nonprofit organizations. But those loans must be paid off, which amounts to a new mortgage, which can be challenging for disaster survivors.
The alternative option for storm victims is to seek help from charities. But as disasters multiply and the economy slows, those charities are drying up, with no guarantee that they can help everyone who needs them.
And the scale of that need is likely to be immense.
In Florida, only 49.5 percent of floodplain homes had flood insurance last year, according to Milliman, despite the state more exposed to hurricanes than anywhere else in the country.
That really puts Florida near the top of the flood coverage list. In other high-risk states, the numbers are much lower. In Texas, 32.1 percent of homes in the floodplain had flood insurance. In Alabama, the number was 21.1 percent; in Georgia, it is 20.7 percent.
In West Virginia, whose steep valleys create some of the worst flood risks in the country, only 11 percent of floodplain homes had flood insurance.
The number of homeowners with flood insurance dropped after a recent FEMA decision that changed the way flood insurance prices are determined, according to Steve Bowen, chief scientific officer at Gallagher Re, a reinsurance broker.
Last fall, FEMA began setting the cost of flood insurance based on the specific risk faced by each individual household. Before that, premiums were determined using more general information, such as whether a home was within the floodplain.
The new pricing structure means that rates for subprime homes now reflect something closer to the true cost of the risk they face. FEMA made the change to make the insurance program more financially self-sufficient, relying less on taxpayer funds after major floods.
The agency also hoped the more accurate rates would communicate the threat to property, perhaps causing people to think twice about living in a dangerous area.
But the new price meant steep rate increases for some houses.
After the new prices took effect, the number of homes with federal flood insurance coverage, which had already been slowly declining, began to drop even faster, Bowen said.
The number of households nationwide covered by the insurance program has dropped by more than 165,000 under the new pricing scheme, a reduction of just over 3 percent, FEMA data shows.
In Florida alone, the number of homes with federal flood insurance has dropped by an average of more than 4,000 homes per month since the new prices began.
David Maurstad, the FEMA official in charge of the flood insurance program, said there was “no basis” to connect the drop in the number of flood insurance policies with the price change.
Other factors could have caused the drop, including the economic fallout from the pandemic, the agency said.
Bowen, the insurance executive, disagreed. Given that the increase in decline began when FEMA began implementing its new rates, “it’s probably not out of bounds to make that connection,” he said.
“FEMA’s heart is in the right place,” said Mr. Bowen. Still, he said, “it has to be a little disappointing to the people at FEMA that the numbers are down.”