Will Flood Insurers Have Enough Money to Pay Out?

Prior to Harvey, the National Flood Insurance Program (NFIP) was already $24 billion in debt and now that Irma seems to be making it’s way to Florida it’s a certainty there will be more claims to be paid out in addition to the damage that has already been done in Texas. The question is will there be enough money?

The NFIP helps thousands of homeowners who live in flood prone areas with financial assistance “by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations.” The program was created by Congress in 1968 after Hurricane Betsy caused massive flooding in Florida and Louisiana just three years prior.

Policymakers figured that in order to truly deal with the cost associated with flood damage the government would sell insurance to homeowners. For a while the program worked. “Storm surge stayed relatively low, and for decades, the NFIP was running in the black.” However, in 2005 when Hurricane Katrina demolished New Orleans and parts of the Gulf Coast the NFIP found itself in debt, which was made worst after Hurricane Sandy in 2012.

The House overwhelmingly approved nearly $8 billion in financial aid in response to Harvey, taking quick action to help victims of the devastating flooding in Texas. The approval was ultimately attached to raising the federal debt ceiling and has sparked a debate of it’s own as Rep. Mark Walker of North Carolina expressed frustration over the decision.

But will $8 billion be enough, and after Irma what will that number rise to? Following Hurricane Katrina in 2005 the NFIP had to borrow $18 billion from the federal government to pay out insurance claims. No exact number has yet been announced of what the actual pay out cost will be but one can only assume that tax payers will have to get prepared to shoulder some burden.

In the State of North Carolina it is not a requirement for homeowners to have flood insurance in place unless they live within a flood zone. However, flood maps can change and are often times outdated. In Southern Texas for example, there are many people who don’t have flood insurance and will have to pick up the tab on their own. According to Brentley Wright, CEO of Diverse Legacies, an insurance firm, all homeowners should consider adding flood insurance to their homeowner’s policy as the current insurance they have in place may not cover flood damages. Be sure to contact your insurance company to make certain your home is properly insured.

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