Hurricane Harvey hit homes across southwest Texas and southwest Louisiana with flood losses estimated between $25 billion and $37 billion, according to preliminary data from property analytics firm CoreLogic. Only about $6.5 billion to $9.5 billion of those costs will be covered by insurers, cites the report. That’s because only a small percentage of homes hit by Harvey are covered by Flood insurance through the National Flood Insurance Program.
Standard homeowners insurance policies don't cover damage from rain or flood waters, which many still don’t realize. Furthermore, in the case of Harvey, many of the damaged homes weren't in high-risk flood zones so homeowners didn’t think they needed coverage.
On the heels of Harvey, Irma barreled in destroying several Caribbean islands as well as the Florida Keys and hitting the mainland of Florida hard. Estimates from the Federal Emergency Management Agency (FEMA) suggest that 25% of the homes in the Keys were destroyed and 65% sustained major damage. Moreover, the Miami Herald reported that FEMA estimates Hurricane Irma could generate more than $11 billion in flood damage claims. The number of Florida claims could reach 100,000.
Households with federal Flood insurance policies can claim up to $100,000 for personal property in addition to $250,000 for their property. Yet, again, many homeowners opt to go without this coverage, believing they don’t need the coverage. Additionally, the NFIP was already in trouble before Hurricanes Harvey and Irma made landfall. After a series of floods caused by major storms in recent years, including Hurricane Katrina in 2005 and Sandy in 2012, the program is roughly $25 billion in debt. Congress has tried to reform the program but to date has made little progress.
Additionally, U.S. insurers have made the case to state regulators to help ease federal policy restrictions to make it easier for companies to enter the Flood insurance market. The goal is to coexist with the NFIP and help cover gaps in federal coverage, as they try to alleviate fears of a complete replacement of the federal program by private carriers.
Flood coverage is an integral component of a comprehensive insurance and risk management program to help mitigate the high cost of loss, particularly as storms become more powerful and widespread in their devastation and reach. RPS assists agents with finding markets to secure coverage for difficult-to-place risks, such as coastal properties, and to supplement an insured’s program with Flood and Excess Flood insurance among other catastrophic coverages.
Sources: Miami Herald, CNN, Reuters