FLOOD06289 - Laserfiche WebLink

Home Browse Search

deficit of $261 per policy in 1979 to a surplus of $98 per policy in 1987. A sur- plus was realized in fiscal years 1986, 1987, and 1988. As of October 1, 1988, the flood insurance fund was operating with a net surplus of $450 million, the result of a combination of rate increases and relatively low flood losses during those years. The accumulated surplus provides a reserve for years with cata- strophic losses. In 1983, the Federal Insurance Administration initiated its "\-Vrite-Your- Ovm" program whereby private insurance companies, under special arrange- ments, are permitted to sell and service flood insurance under their own names. The success of this program is evidenced by the fact that 80% of all flood insurance is presently sold by the participating \VYO insurance companies. Insurance premiums are based on the location of a structure within the floodplain and are determined primarily by the height of the structure's lowest floor in relation to the height of water during a base flood. Higher rates apply to structures subject to fast-moving waters. I'\ew and substantially improved structures in the floodplain that are not properly elevated to the base flood level are subject to higher rates than structures already in the floodplain at the time a community joined the program. Since 1974, flood insurance rates have increased several times in order to reduce the amount of the federal subsidy and bring the cost of flood insurance closer to true actuarial rates. In early 1988 the administrator of the Federal Insurance Administration announced success in "making the National Flood Insurance Program self-supporting for the historical average loss year." Even so, the existing premium base is not large enough to permit the I'\ational Flood Insurance Program to operate on a fully actuarial basis. But because only 15% to 30% of the nation's floodprone structures are insured, there is plenty of room for increased market penetra- tion. Several strategies for increasing the number of insured structures have been suggested, including requiring more stringent enforcement by lenders of the mandatory purchase requirements, increasing public awareness of the flood hazard, imposing disclosure requirements on real estate agents, offering special insurance coverage and policy riders, and maintaining premiums at more affordable levels. Concern has been expressed that flood insurance premium costs have increased to a level so high that many people do not purchase flood insurance unless they are required to do so by a mortgage lender or unless they have experienced flooding. Many of those who do purchase insurance allow it to lapse later. The net result appears to be that only those individuals with the greatest risk actually purchase and maintain flood insurance. To maintain actuarial rates for this group, insurance rates may be forced even higher. Many of the claims paid out each year are on structures that have previ~ ously incurred damage. The Federal Emergency Management Agency defines these as repetitive loss structures-those for which two or more losses of more than $1,000 (building and contents combined) have been paid during the most recent lO-year period. From January 1980 through December 1989, 27.5% of the total losses and 32.j% of the amount paid on them were repetitive losses. Most repetitive losses are suffered by structures built before regulations and are for relatively small amounts; the building damage is usually a low per- centage of the building value (53.2% of repetitive losses are for 10% or less of the building value). A high proportion of the repetitive loss claims pay~ ments are for contents. Repetitive losses tend to be concentrated in a small number of National Flood Insurance Program communities, and many occur outside the desig- nated floodplain. Six repetitive loss communities have had 29.7% of all the repetitive losses; 20 communities have had 44.3% of the losses. Although 12 of the top 20 repetitive loss communities are coastal, only two have significant numbers of policies in coastal areas. Only 22 of the top 100 repetitive loss communities are primarily subject to tidal flooding. Because of this it is believed that the repetitive loss problem is more related to riverine or storm- water flooding than to tidal flooding. The Federal Insurance Administration has implemented a Community Rating System to encourage communities to go beyond the required standards. The incentive .......ilI be a reduction in Hood insurance premiums for policy- holders within communities that take approved actions to reduce flood losses. NFIP Flood Claims Paid 1978-1987 State1 Alabama Alaska Arizona Arkansas California Colorado Connecticut Dela\'vare Disll'ict of Columbia Florida Georgia Guam Ha\vaii Idaho Illinois Indiana Iowa Kansas Kentllcky Louisiana \.laine \laryJand \1assachusetts ,\1ichigan \'finnesota \1ississippi i\lissOUI-i !\lontana Nebraska Nevada New Hampshire New Jersey New ~,lexico New '\-ark North Carolina ::\'orth Dakota Ohio Oklahoma Oregon Pennsyl....ania Puerto Rico Rhode Island South Carolina Sou [h Dakota Tennessee l"(>xas Utah Vermont Virgin Islands Virginia \Vashington West Virginia \Visconsin \V>'oming Totals Amount of Claims Paid S 87.805.791 332.839 14.064.010 10,800,307 108,846,266 3,223,467 :14.906,126 1,929,167 101,5]8 165,125.349 8,455.396 17.4-92 10.35-1.101 499. ]93 81.307.867 13,289.339 3,101.421 12,9.')7,557 48,913,951 502.019,965 15,921.597 21,859.402 40.890.955 23.999,710 16,518,655 108,496.982 113.(143.717 1.943,610 9,460,795 1,891,589 3,729,914 1] 7,979,379 490,587 105.27] ,51l4 15.495,792 9,786.873 2'1.549.982 60,986,298 2.'104.346 61,971.275 32.200.608 7,828,172 10,324,333 1,403,419 8,482,208 575,588,O'~6 4.439,661 1,140,338 2,:332,664 59.077.329 13.]96,518 67,738.531 3.295,144 1.038,852 $ 2,6:-)7.819.907 Sr,lmr F]DOd [nsurance I'ro,tllcrrs \lali,onal COIllmitte(' t "Slat<\" a, ddined bv FE~1A program rt'gulations, Illt'am all\' stall', Ih" [)i~tric( ofCoJuIllhia. Ih"lnriwrie~ and I")~~e~sions of the Lnllnl States, tht' CommoJl\w;i!lh of PunT" Rico and the 'Ji-Ilst 'li:lTllon urthe Paciiic Islands. . - 41