In the United States, flood damages are insured by a program run by the U.S. government, the National Flood Insurance Program. This program was established by law in 1968. Prior to that, flood insurance was provided by some homeowner’s insurance policies, but it was difficult for insurers to appropriately assess the risk of floods in many areas since they didn’t have high-quality maps of flood-prone areas. After taking losses on those policies, most insurance policies stopped covering flood damage.
When those policies stopped covering flood damage, floods still happened and people’s homes were still destroyed. If insurers weren’t covering the damage, the government could either step in and do something or leave people whose insurance didn’t cover the damage out on the street. This situation gave rise to The Flood Insurance Act of 1968 and the Flood Disaster Prevention Act of 1973, which established the National Flood Insurance Program and then made participation mandatory for property in special flood hazard areas.
Thus, today, it’s the government who provides flood insurance in the U.S. However, the flood insurance program right now is in dire fiscal straits; after hurricanes Katrina and Sandy, the program is more than $20 billion in debt and is not taking in enough money to cover the growing losses.
A major cause of this problem is underestimating the risks of flood damage. It should be clear that accurate maps of flood zones are absolutely necessary to run a flood insurance program. That’s why the private insurers got out of the business in the first place; they didn’t have the money to make accurate assessments of flood risks across the entire country.
The U.S. government has the resources to map these areas. The zones required to buy flood insurance and the premiums required for various structure types can be based on national data if the areas are well mapped. In some places, that is the case, but across much of the country it isn’t, and that problem is getting worse
FEMA, the Federal Emergency Management Agency, the agency tasked with preparing for and responding to disasters, is in the process of updating maps of flood-prone areas around the country. For example, flood maps for areas in New York were just released a couple days ago. FEMA was in the process of updating flood maps for areas in New York and New Jersey last year just as Sandy hit; more complete documents are slowly coming out now.
In many areas, the flood maps are hopelessly out of date. Some places haven’t been updated since the 1970’s. Re-mapping these areas is the only way that the flood insurance program will be able to set premiums, and it’s the only way people will be able to construct houses with appropriate levels of flood defenses. Basically, if these areas aren’t re-mapped, then the U.S. taxpayer will continue to be on the hook for costs from floods that weren’t understood. The taxpayers can basically choose; map the areas and let the maps guide building, or pay much larger settlements to rebuild areas that were destroyed by flooding.
Right now, the U.S. government is choosing the latter; paying much larger amounts of money to rebuild. FEMA’s flood mapping budget has been slashed the last 2 years; Congress authorized FEMA to spend $400 million a year to update their flood maps in 2012, a level of money which could complete the mapping nationwide in 5 to 10 years and which is small compared to the Flood Insurance Program’s losses on Hurricane Sandy alone. In 2011, the government was spending ~$200 million a year on this mapping project, so that money would have helped complete it more rapidly.
Despite being told to spend more money on the mapping program, the funding to do so has evaporated. FEMA’s flood-mapping budget in 2012 was slashed back to $99 million and is continuing to fall. Thanks to sequestration, an automatic series of budget-cuts enacted by Congress impacting every federal agency, the budget for 2014 only includes ~$84 million in flood-mapping funds.
That rate of funding will allow the government to complete its new flood assessments in about 40 years. Of course, in 40 years, land use changes and sea level rise will make many of these new assessments out of date as well, just as they are now.
This program is going to be paid for whether the taxpayer wants to or not. Either the U.S. is going to update these maps to allow for appropriate building and insurance premium payments, or the taxpayer will pay larger claims when flood damage happens. The taxpayer is on the hook either way.
Worse, the lack of updated maps is harming the rebuilding from Hurricane Sandy. Property owners in flood-prone areas need to know what the assessment of flood-risk is in order to determine the level they can build at. Does a rebuild house need to be raised above the water level? Can property safely be built on a site or is flooding too likely? The results of the new mappings in New York and New Jersey are slowly becoming available, but with the budget cuts, it will be months, possibly years before those maps are finalized, and until then, rebuilding may just have to wait.
Image Credit: FOX 59 Indiana, Flood from earlier this year:
Flood Maps for Rockland County, New York released:
FEMA statement from 2012 on impact of budget cuts on mapping program:
State of Flood Insurance Program and FEMA funding, press report, used specifically to get current budget numbers:
FEMA Records on 1968 and 1973 Flood Insurance Acts: