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Katrina + 1: Are we rebuilding in harm's way?

POSTED 24 AUGUST 2006

To be sure, insure
Overall, though we may call hurricanes and floods "natural disasters," the human hand plays a role: Floods cannot destroy houses that nobody built in the path of a flood, yet some government policies make it easy to build in the path of danger. As a group of climate and weather scientists observed in July, "Rapidly escalating hurricane damage in recent decades owes much to government policies that serve to subsidize risk. State regulation of insurance is captive to political pressures that hold down premiums in risky coastal areas at the expense of higher premiums in less risky places. Federal flood insurance programs likewise undercharge property owners in vulnerable areas. Federal disaster policies, while providing obvious humanitarian benefits, also serve to promote risky behavior in the long run."

Murky water covers street and flows around trees and houses
A New Orleans street, several weeks after Katrina. Photo: Courtesy Dustin Anderson

Flood insurance is a case in point. To own a house, you need homeowner's insurance. But private insurers are way too smart to insure against way-expensive floods. So if you build a house inside a 100-year floodplain (as mapped by the Federal Emergency Management Agency), you'll have to buy coverage from the National Flood Insurance Program (NFIP). But you are only eligible if your community has a plan to mitigate flood risks.

It sounds great on paper: Your community cuts risks with smart zoning, and you get insurance. But how it works in practice can vary. For one thing, there is a continual wrangle over the true exposure to a 100-year flood. Even where a century of data exists, the flood map is commonly made "as if nothing has changed," says Nicholas Pinter of Southern Illinois University, even though most changes in the floodplain (like levees) and the watershed (like paving and construction) make floods worse. "Depending on the magnitude and rate of change, on a lot of U.S. river systems, including the Mississippi River," the map of a 100-year floodplain is "meaningless."

Flooding has become a large source of loss in the US.  Other types include famine and draught.
Flooding is the biggest single cause of loss due to natural disasters. Note the exploding cost of disasters. Courtesy Evan Mills, Lawrence Berkeley National Laboratory

Still, NFIP rules do force the elevation of buildings that are most exposed to floods, says Pamela Pogue, Rhode Island's floodplain manager. "The NFIP sets out minimal standards, and in some cases too minimal, for buildings." Placing houses on pilings allows water to pass underneath, preventing some damage. "Were it not for the NFIP, God knows what they would be building," says Pogue.

Graph indicates how expensive hurricanes have been for the US
Seven of the 10 most costly hurricanes in U.S. history occurred in 2004 and 2005. Figures do not count damage to oil and gas platforms in the Gulf of Mexico, or federal flood insurance losses. Data from Insurance Information Institute

Rules: Made to be broken?
But the NFIP rules bend. This July, the federal government finally agreed to start disbursing about $10 billion to Louisiana and Mississippi, to cover damages to homes, many of which did not carry flood insurance. Homeowners will get up to $150,000 apiece for rebuilding (see "Hurricane Aid Finally..." in the bibliography). In Louisiana, where an estimated 123,000 homes were damaged or destroyed, uninsured residents will see a 30 percent cut in their grants. In Mississippi, uninsured homeowners will simply have to agree to get that insurance after they rebuild.

The hard-hearted might wonder why people who didn't buy insurance were getting coverage, although there are both humanitarian and legal arguments in favor of the payments, especially in New Orleans, where the catastrophe was caused by woefully inadequate levees that were overseen by the federal government. Still, the payouts do eviscerate the flood-insurance contract: If you reduce flood exposure and take out some insurance, the feds will be your insurer of last resort; otherwise, you are on your own. That erodes a key goal of NFIP: inhibiting development in harm's way.

Nationally, the quest to reduce flood hazard is "Not doing so well," says Pogue, who chairs the Association of State Floodplain Managers. "More and more people are moving to the coast.... Even after the four hurricanes in Florida [in 2004], within a week, there were speculators scooping up property along the shoreline."

Government guidelines to obtaining flood insurance in high risk areas
Private insurers won't cover you against floods, but the federal government is eager to help, as you can see from these bullet points from the National Flood Insurance Program. Does NFIP encourage building in harm's way? Image: NFIP

Another indication of flimsy controls on floodplain development comes from the 2006 "Summary of State Land Use Planning Laws" by the Institute for Business and Home Safety: "Relatively little has happened yet in state legislatures with regard to planning mandates that account for natural hazards. ... Most states do not require or even suggest to localities that natural hazards be considered in making land-use and development decisions."

Insurance and global warming
Given the emerging scientific view that global warming is raising sea level and making stronger hurricanes, insurance companies can play an entirely different role in preventing flood-associated hurricane damage: fighting global warming.

The insurance industry is taking note of the problem. In March, for example, the National Association of Insurance Commissioners voted unanimously to establish a task force to examine the impact of climate change on the U.S. insurance industry. The task force will look at how a warming climate may affect the availability and affordability of insurance for consumers and the financial health of insurance companies. Task force co-chief Tim Wagner, director of the Nebraska Department of Insurance, said in a press release, "It's becoming clearer that we are experiencing more frequent and more powerful weather events that pose huge challenges for the insurance industry. The impacts are being felt on our coasts and in the interior U.S. We're seeing all kinds of extreme weather in the Great Plains states, including drought, tornadoes, brushfires and severe hailstorms."

Graph shows that eight of the 11 most expensive disasters in US history have been hurricanes.
Eight of the top 11 insurance payouts occurred since 2001. Data from Insurance Information Institute

A few insurance companies, primarily in Europe, have begun what we might call primary prevention: slowing global warming itself. Interest in the area "has really snowballed," says Evan Mills, an energy expert at Lawrence Berkeley National Laboratory, "including, belatedly, within the U.S. In particular, U.S.-domiciled AIG and Marsh have both issued powerful statements in the past year. AIG is the world's largest insurer and Marsh is the largest broker." Overall, says Mills, insurers in 12 countries have started 200 projects to improve energy efficiency and otherwise reduce carbon dioxide emissions that are the primary cause of global warming.

Fearing flooding? Why not just build a levee?

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Megan Anderson, project assistant; Terry Devitt, editor; S.V. Medaris, designer/illustrator; David Tenenbaum, feature writer; Amy Toburen, content development executive

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