Here is a interesting article on flood insurance. The entire article is well worth a detailed read. Here are two paragraphs from the article.
NFIP does not charge nearly enough to cover the expected costs of its liabilities. The assessments are not sufficient to build any buffer to cover an extraordinary year, such as what occurred with Hurricane Katrina in 2005 or Hurricane Sandy in 2012. Because homeowners don’t incur the full cost of building in a flood zone we end up with more houses there than if homeowners incurred the full cost of the flood risk, which exacerbates the government’s costs in the next disaster. Since 1970, the number of Americans living in FEMA-designated Special Flood Hazard Areas has increased from 10 million to over 16 million today.
The optimal solution would be for the government to get out of the flood insurance business entirely and leave it to the private market, which would
endeavor to accurately measure risk and charge a price for its insurance that covers the expected costs.
NFIP does not charge nearly enough to cover the expected costs of its liabilities. The assessments are not sufficient to build any buffer to cover an extraordinary year, such as what occurred with Hurricane Katrina in 2005 or Hurricane Sandy in 2012. Because homeowners don’t incur the full cost of building in a flood zone we end up with more houses there than if homeowners incurred the full cost of the flood risk, which exacerbates the government’s costs in the next disaster. Since 1970, the number of Americans living in FEMA-designated Special Flood Hazard Areas has increased from 10 million to over 16 million today.
The optimal solution would be for the government to get out of the flood insurance business entirely and leave it to the private market, which would
endeavor to accurately measure risk and charge a price for its insurance that covers the expected costs.
The government's hidden housing subsidy for the rich
It's time to reform the flood insurance program.
www.politico.com
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