As hurricane seasons worsen, taxpayers subsidize people to live in risky areas - WaPo Editorial
Hurricane Helene likely caused more than $30 billion worth of damage. Less than two weeks later, Hurricane Milton inflicted almost $50 billion more. With six weeks left in this hurricane season, the Small Business Administration’s disaster loan program is already out of money. And more tropical storms are swirling over the Atlantic. Who pays for all of this?
Because private home insurers generally find this sector of the business unprofitable, the federal National Flood Insurance Program shoulders the burden of providing homeowners inundation coverage — and it has problems. The NFIP is managed by the Federal Emergency Management Agency — the same body fighting misinformation and dodging vigilantes as it tries to distribute much-needed aid to the victims of Helene and Milton. The program provides nearly $1.3 trillion in coverage to more than 5 million policyholders. It’s funded by the premiums collected from policyholders but borrows from the U.S. treasury when claims it’s obligated to pay outpace revenue, as is often the case. Congress canceled $16 billion in NFIP debt in 2017; since then, the program has borrowed billions more from taxpayers.
(snip)
Congress created the NFIP when private insurers retreated from the flood insurance market after the first storm to cause $1 billion in losses: Hurricane Betsy in 1965. The government stepped in with two conditions, which were intended to avoid “moral hazard,” the phenomenon whereby insuring against a particular risk encourages more people to take it. It required communities to adopt land-use policies that discouraged development in flood-prone areas, and it mandated that homeowners pay “actuarially sound” premiums. Moral hazard took hold anyway, as developers and other real estate interests gamed the system to suppress premiums and permit building in low-lying areas and beachfronts exposed to storms.
(snip)
Still, premiums greatly lag behind risk assessments. Congress should enable FEMA to build on the Risk Rating 2.0 pricing model, adjusting rates to reflect actual risk. Yes, more accurate pricing might raise some homeowners’ premiums. But this necessary step will help the program become fiscally stable and provide coverage in the coming years. It’s simply unfair to ask the entire population to provide deep subsidies for properties that, by definition, only a portion of Americans can occupy and enjoy.
https://wapo.st/48id8bI
free
= new reply since forum marked as read
