Flood Insurance ? Alexandria

August 27, 2011 by steve2

Don Taylor gives us the scoop on flood insurance.

Flood insurance is provided in the United States by the federal government via the National Flood Insurance Program (NFIP), in two ways. First, the government directly provides coverage for some properties. Second, the government works in concert with around 90 private insurers who function as servicing contractors. In the second case, the profits from such flood insurance are private, but the losses are socialized as private insurance companies bear none of the underwriting risk associated with this insurance.

Some details about the NFIP include?..

can compel the purchase flood insurance if the property resides in Special Flood Hazard Area (SFHA) (since 1974)

around 80% of covered properties are assessed full-risk premiums based on Army Corps of Engineers models; the other 20% have subsidized premiums because the covered dwelling was built prior to the identification of SFHAs in 1974

because of subsidized premiums, in some years the NFIP will run a loss, in others a ?profit?

there are a variety of reasons that full risk premium policies may not in fact represent the expected value of future damages (the goal for such premiums)

has a statutory limit on the aggregate amount of money that can be borrowed to pay out damage claims; this limit was $1.5 billion from 1996-2005; after Hurricanes Dennis, Katrina, Rita and Wilma the cap is now $20.725 billion; once the cap is exceeded, no claims may be paid

Hurricane Katrina alone cost the NFIB $17.75 billion

Individual policies are limited to $250,000 for dwelling/$100,000 for contents for a home; $500,000/$500,000 for a business

Annual premium increases are capped at 10% annually
risk of loss is highly concentrated; 1% of the insured properties resulted in 38% of the losses incurred by the NFIP from 1978-2004

60% of the single family dwellings covered by the NFIP are in the South; 38% in Florida alone.

I can see some need for this kind of insurance for critical businesses in flood prone areas, especially along the coasts. We need functioning ports. Defense facilities and the communities that support them sometimes need to be built along the coast and are subject to flooding. What I cannot see us subsidizing are vacation homes or homes that are electively built in flood prone/hurricane prone areas. I am happy to see that they put some limits on this insurance, but when the law sunsets again, it needs to be revised. We need strict limits on what is covered, and private companies need to be at risk for loss, not have guaranteed freedom from loss.

Posted in Community, Ethics, Law & Legislation, Lifestyle, Nation, Nature, Politics, Public, Steve S. | 9 Comments

Source: http://aleksandreia.wordpress.com/2011/08/27/flod-insurance/

sinead o connor nadya suleman rolling stone dodgers crude oil prices the cars kendall jenner