Hurricane Harvey

[houstonscott]

Thumbs up.

 

[smstonypoint]

It's cheap. About $350 a year.

The premiums are subsidized by the government.

Steve

 

[txdon]

RNG the news is reporting that the area flooded is the size of Michigan. That would be a big area to keep vacant for a once in 800 year event.

 

[sseelhoff]

An 800 year flood zone means there's going to be, on average, a flood in that area every 800 years. In other words, a known hazard. If you choose to live in such an area, you're gambling that the flood won't happen while you're there, knowing full well that it might. Not much difference in that and living in the inundation zone of a dam, at least the way I see it.

That's not what it means. A 100 year flood means a 1% chance of occurring in any given year. This year, 1%. Next year, 1%. It's not a guarantee that it will happen one out of 100 years. It's not even a probability that it will happen once in 100 years. The chances are not additive, i.e. year 1=1%, year 2=2%. Each year probability is 1%.

Hence an 800 year flood means a 1/8 of 1% chance of occurring in any given year. That is infinitesimally small chance. That's not a "known hazard." That's akin to saying getting struck by lightening is a "known hazard" or getting hit by falling space debris is a "known hazard." Knowing something can happen is not the same as knowing something will likely happen to you.

If you think otherwise, I question your ability to understand risk. Do you stay at home every day because getting hit by a car or having an accident is a known risk? If not, why not?

It's not gambling. If you had a 1/8 of 1% chance of winning a game of chance, would you take the risk? Conversely, if there was only a 1/8 of 1% chance of an event occurring, would you feel comfortable betting against that happening?

Why would mutiple colleges (Rice, U-Hou, Texas A&M) all have campuses here? Surely their engineers and Professors could have explained to them why this was such a "gamble." Why would major insurance carriers (who are known to be risk averse and hate to lose money) put offices here, when the these are "known risks." Perhaps you should hire out as a consultant on risk management? These Universities and companies employing underwriters (who are paid to predict risk), as well as thousands of other businesses (including oil companies-Hello Exxon!) could use your technical expertise.

When you're done moving everyone out of here, you can turn your attention to SoCal. I hear they have a known risk of earthquakes. Then maybe you can move to the midwest, to alleviate their "known risk" of tornados.

 

[sseelhoff]

The premiums are subsidized by the government.

Steve

Are they subsidized? I know the feds control the market, just like they now do with student loans.

 

[Thisusername4sale]

Here's another example. I used to live in the San Francisco Bay Area, near the Hayward Fault. That fault is still active, and when I looked it up on the USGS site, I decided to purchase earthquake insurance when I bought my first house. I knew it wouldn't cover everything, but it would cover enough that I could afford to start over. When I moved up here, the USGS maps showed a low incidence of earthquakes, and no major faults anywhere near. I dropped the earthquake insurance, but even if I'd decided to maintain it, the premium would have been a fraction of what it was in the Bay Area. Tthese days, I'm fortunate enough to be able to self insure just in case there was a total loss. If that wasn't the case, I'd still probably have the insurance. I wouldn't have to go out looking for a government handout.

And just one more. This new place is in wildfire country. I carry fire insurance, but I also spend a lot of time each spring cleaning brush and and keeping flammables away from the house. Known hazard, known mitigation strategies. I don't know how you do that in a hurricane zone, unless it means building on stilts or just not moving there to begin with.

I'm half serious here...Maybe, just like we should have death panels before Medicare pays out, we should do the same before a payout is given to a hurricane victim. We'd save tons of money. Remember much of what has flooded here had zero record of flooding previously. Further, those dumb Meterologists predicted this about as well as a predicted my last blackjack hand on the sutoshuffler. It's not that they didn't try they just guessed rainfall by less that 50% of actual. That reminds me of last year when that hurricane was supposed to come up the FL coast and, per that CNN reporter said everyone within a mile of the coast would die. He was somewhat wrong and we were pissed at him for overreacting.

 

[houstonscott]

The premiums are subsidized by the government. Steve

Not sure what that means. If you mean the government sell it at loss, got proof.

 

[Thisusername4sale]

Are they subsidized? I know the feds control the market, just like they now do with student loans.

Feds "control" the market because private insurance started excluding flood in the 50's or thereabouts so in the sense that the Feds don't profit from the flood insurance program I guess it's subsidized. Most of the homes we talking about here had no flood insurance. Disaster Aid is different from flood insurance and given to pretty much whoever requests it and was affected by the storm kind of like that Deepwater Horizon money.

 

[smstonypoint]

Are they subsidized? I know the feds control the market, just like they now do with student loans.

Not sure what that means. If you mean the government sell it at loss, got proof.

See Hurricane Harvey Could Spur Congress to Act on Flood Insurance and this from the GAO:

"The National Flood Insurance Program (NFIP) is a key component of the federal government's efforts to limit the damage and financial effect of floods. However, it likely will not generate sufficient revenues to repay the billions of dollars borrowed from the Department of the Treasury (Treasury) to cover claims from the 2005 and 2012 hurricanes or potential claims related to future catastrophic losses. This lack of sufficient revenue highlights what have been structural weaknesses in how the program is funded. Since the program offers rates that do not fully reflect the risk of flooding, NFIP's overall rate-setting structure was not designed to be actuarially sound in the aggregate, nor was it intended to generate sufficient funds to fully cover all losses.

Instead, Congress authorized the Federal Emergency Management Agency (FEMA) -- th agency within the Department of Homeland Security (DHS) responsible for managing NFIP -- borrow from Treasury, within certain limits, when needed. Until the 2005 hurricanes, FEMA had used its authority to borrow intermittently and was able to repay the loans. As of March 2016, FEMA owed Treasury $23 billion, up from $20 billion as of November 2012. FEMA made a $1 billion principal repayment at the end of December 2014�ts first such payment since 2010.

The Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) contained provisions to help strengthen the financial solvency of the program, including phasing out almost all discounted insurance premiums (for example, subsidized premiums). However, the extent to which its changes would have reduced NFIP's financial exposure is unclear. In July 2013, we reported that FEMA was starting to implement some of the required changes. However, on March 21, 2014, the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) was enacted. HFIAA reinstated certain premium subsidies and slowed down certain premium rate increases that had been included in the Biggert-Waters Act. Aspects of HFIAA were intended to address affordability concerns for certain property owners, but may also increase NFIP's long-term financial burden on taxpayers. Further, an outdated policy and claims management system has also placed the program at risk. As a result of its substantial financial exposure and management and operations challenges, the program has been on our High-Risk List since 2006."

U.S. GAO - High Risk: National Flood Insurance Program

Steve

 

[sseelhoff]

Feds "control" the market because private insurance started excluding flood in the 50's or thereabouts so in the sense that the Feds don't profit from the flood insurance program I guess it's subsidized. Most of the homes we talking about here had no flood insurance. Disaster Aid is different from flood insurance and given to pretty much whoever requests it and was affected by the storm kind of like that Deepwater Horizon money.

Homeowners insurance policies don't cover rising waters. That has been a longstanding exclusion. There are private insurers that will provide a flood endorsement on HO policies. Because the government controls the market doesn't necessarily mean that they subsidize it. They could certainly set premiums to reflect the risk. Even under the Fed program, there is a premium to the insured. I would hope it is calculated in such a way that the government doesn't assume a loss.