Deep in debt, flood insurance program expected to boost rates – Houston Chronicle

#flood #damage #houston


#

Christian Rumscheidt sits on the stairs in his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Christian Rumscheidt sits on the stairs in his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Photo: Michael Ciaglo, Staff

Christian Rumscheidt walks through his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Christian Rumscheidt walks through his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Photo: Michael Ciaglo, Staff

Christian Rumscheidt walks through his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Christian Rumscheidt walks through his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Photo: Michael Ciaglo, Staff

Christian Rumscheidt points out water damage in his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Christian Rumscheidt points out water damage in his house Wednesday, March 8, 2017, which is still undergoing repairs after it was flooded last April. ( Michael Ciaglo / Houston Chronicle )

Photo: Michael Ciaglo, Staff

The cost of federal flood insurance will likely rise for thousands of Houston-area homeowners after Congress hits its September deadline to renew and reform the deeply troubled program.

The National Flood Insurance Program was created because private insurers couldn’t bear the risk of catastrophic loss, but the program is $24.6 billion in debt and struggling to remain solvent. It covers more than 300,000 homes in Harris and Galveston counties.

“The program offers rates that do not fully reflect the risk of flooding.” the U.S. Government Accountability Office concluded in a report last month .

Ed Schreiber, Houston region president for Bancorp South GEM Insurance Services, which sells federal flood policies, says long-delayed changes have to come soon. “We have a product whose pricing hasn’t been able to support the losses,” he said.

Congress tried to fix the problem in 2012, but the program lapsed for a month amid the effort, stalling home sales in flood-prone areas. The reforms that finally passed caused some rates to soar, so they were swiftly repealed. Now, a five-year extension is set to expire this fall, demanding fresh action. No one can say exactly what measures lawmakers will take, but one thing seems probable: rates will rise, especially in flood-prone places.

More Information

NFIP policies in force nationwide: 5.01 million
In Texas: 606,052
In Harris County: 254,780

Total NFIP coverage nationwide: $1.2 trillion
In Texas: $163.5 billion
In Harris County: $73.3 billion

Total NFIP claims paid nationwide: $56.7 billion
In Texas: $6.8 billion
In Harris County: $3.05 billion

Christian Rumscheidt, like many Houstonians who live in low-lying areas, knows how necessary it is to carry flood insurance.

When water started rising on Tax Day 2016, he bolted from his front door and started swimming, nine doors down El Miranda Drive to the house he inherited from his father. There, boxes of watercolors his late grandmother had painted rested on the floor as floodwater pressed on the front door.

He threw a brick through a window, climbed in and salvaged every painting but one. In both houses, about 18 inches of water claimed almost everything else: Furniture, carpet, new wood floors, a leaf blower and a washing machine, baseboards, insulation, Sheetrock, and even the wood inside the walls.

He avoided financial ruin because he paid $446 annually for an NFIP policy on each of his houses. After the flood, he claimed $110,000 for one and $270,000 for the other.

Translator

To read this article in one of Houston’s most-spoken languages, click on the button below.

Business

He pays that relatively low rate because, like 60 percent of the homes that flooded that day, Rumscheidt’s houses sit outside a 100-year floodplain, the low-lying space beside waterways most prone to flooding. Rumscheidt’s homes overlook Horse Pen Creek, and the floodplain ends in his back yard, within feet of his house, according to current maps.

Homes outside a floodplain can pay about $450 for full coverage, getting $250,000 for structural damage and $100,000 for contents, said Ruth Escamilla, a sales executive at Bancorp South GEM in Houston.

A Harris County homeowner living inside a 100-year floodplain without certain mitigation measures – a raised foundation, for example – can pay about $3,200 per year for flood insurance, with a $2,000 deductible, while someone living near the coast in Galveston can pay up to $8,000.

“The rates are only going to get worse as time goes on,” she said. “They’re taking away more of the subsidies, so that we’re going to be more and more responsible for the floods.”

Between 2008 and 2012, the federal program survived a series of 17 short-term Congressional renewals that left policy unchanged. Once in 2010, inaction allowed the program to lapse for 33 days. The National Association of Realtors calculated that, in turn, caused the delay or cancellation of about 1,420 home sales per day for that period. A repeat of that lapse is the biggest immediate concern for Houston.

“The inability to obtain flood insurance freezes this entire marketplace,” said Ed Wolff, co-chair of governmental affairs advisory group for the Houston Association of Realtors.

In 2012, lawmakers eventually passed a five-year extension and reform with an act that phased out subsidies for some high-risk homes, which it said paid “artificially low rates.” Some homeowners in Florida, in particular, saw their rates projected to rise nearly tenfold. Groups protested, and virtually all key provisions of the 2012 reform were repealed two years later.

“They’ve been punting this ball down the street,” said Mark Hanna, spokesman for the Insurance Council of Texas. “Eventually, they’ve got to come up with some type of remedy.”

Meanwhile, flood-related claim costs have surged. All but two of the 15 most expensive events for the flood insurance program have occurred since 2000. Hurricane Katrina in 2005 tops the list at $16.3 billion, followed by Superstorm Sandy in 2012, $8.4 billion; Hurricane Ike in 2008, $2.7 billion; and Louisiana floods of 2016, $2.1 billion.


Leave a Reply

Your email address will not be published. Required fields are marked *