The Great Lie of American Flood Risk
(WIRED) Nick Stockton March 20, 2017 — MILLIONS OF AMERICANS are living a lie. You might be one of them: The homeowners who live near a flooding California river, the landlords in a slowly subsiding Southern city, or the business operators on a shoreline inundated a Nor’Easter’s storm surge. And all around the country, the federal government is dramatically undervaluing the risk of flooding to their homes or businesses.
The lie originates from the National Flood Insurance Program, which sets rates for 5 million people living in flood-prone areas—based on flood projections that are sometimes decades out of date. Even when the projections are updated, the program lets people pay the old, underpriced insurance rates. That’s left the program $24 billion in debt, running an annual deficit of $1.5 billion. Congress is currently holding hearings to reauthorize the NFIP and put it back in the black. But updated, truthful flood insurance prices could put millions of home and business owners deep in the red.
The insurance business relies on bad things happening, but not to too many people at once, and also somewhat predictably. Floods are typically the opposite: widely destructive and wildly unpredictable. For a long time, private insurers wouldn’t cover them. So in 1968, the federal government stepped in with the NFIP. FEMA, the agency in charge of the program, sets its rates on so-called Flood Insurance Rate Maps, which show which properties could conceivably be inundated by an overtopped river, storm surge, or other flooding event. But the maps also determine who must buy flood insurance. So the NFIP rate doesn’t just protect people from losing their homes, it influences property values and mortgage rates for millions.