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Old 06-11-2019, 08:34 AM
 
Location: Long Island
33,264 posts, read 14,037,836 times
Reputation: 7120

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This has been an ongoing problem and if anything it has worsened since insurance has gradually risen with commensurate risk. Many owners particularly low income have dropped policies and others that haven't experienced a disaster in a few years get a false sense of security. A good percentage of people that were devastated by the California fires last year cant afford to rebuild, I expect the same for those impacted by the current flooding in the mid west.


These homes should never have been built in these areas to begin with but now they are stuck and it will get worse. Rebuilding in these areas shouldn't be an option.


Quote:
WASHINGTON ó Despite years of devastating flooding and hurricanes, the number of Americans with flood insurance remains well below its level a decade ago, undermining the nationís ability to cope with disasters just as climate change makes them more frequent and severe.

In some of the states hardest-hit by the recent brutal flooding in the Midwest, the number of federal flood insurance policies has dropped by at least one-third since 2011. As a result, in Nebraska, Illinois and Missouri, the share of homes in floodplains that have flood insurance is now 15 percent or less.
The declines have persisted despite a two-year campaign by the Trump administration aimed at doubling the number of Americans insured against floods, which standard home insurance policies typically donít cover. That effort has faltered, and officials are now beginning to worry about the disaster after the disaster: What happens as the water recedes, and many people canít afford to rebuild?
https://www.nytimes.com/2019/06/08/c...insurance.html
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Old 06-11-2019, 11:49 AM
 
7,006 posts, read 2,557,933 times
Reputation: 3830
1) Floods are not caused by climate change. They are a perfectly natural phenomenon.

2) Choosing to build where floods happen is a risk, and the consequences of that risk should be borne by the person choosing to take the risk, and exactly nobody else, ever. Taxpayers, as in he people being robbed at gunpoint by the government, should not be tasked with making sure people can escape the consequences of inherently risky choices.

3) If insurers were allowed to charge the proper actuarial rates for insuring against floods, more would, but the cost would be seriously high, which is why the government plays nanny welfare provider for that. Calculate your home's worth in 30 years according to a standard 1-2% annual appreciation equation, then add in the cost of everything in the home that you want covered by an insurer and multiply that number by 0.41 (.26 + .10 + .5 = .41, where 26% is the total chance in a 100 year flood plain that a flood will destroy the home, 10% is the insurer's profit margin and 5% is their cost to administer the policy)

For a $150k home, the cost of the policy over a 30 period would be ~$100k, and like any smart lender/insurer, the amortization schedule would be such that the insurer gets the bulk of their money back in the first 5 years. Using a standard mortgage calculator and amortizing for 30 years at the same percentage as the mortgage itself, a good ballpark cost for just flood insurance, if the private market were to do it profitably, would be about 2/3 of the mortgage payment itself, on top of the mortgage, taxes, homeowners insurance, any PMI or other admin stuff, etc. Because the risk exists, defined by FEMA, that in a 100 year plain over 30 years, 26% chance that house is destroyed and an insurer against that destruction would need to be able to make the insured whole at the time of the destruction. That's a big ask, since each year is an independent 1% chance of destruction, so they need to front load the amount in the recovery and mitigation pool. Welcome to insuring against known risk.

That's why the government jumped in, because they can ignore the profit margin, given their "gun in your face" revenue stream that is a guarantee, regardless of how well they serve you.
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Old 06-11-2019, 12:40 PM
 
52,112 posts, read 41,953,123 times
Reputation: 32530
Quote:
Originally Posted by Goodnight View Post
This has been an ongoing problem and if anything it has worsened since insurance has gradually risen with commensurate risk. Many owners particularly low income have dropped policies and others that haven't experienced a disaster in a few years get a false sense of security. A good percentage of people that were devastated by the California fires last year cant afford to rebuild, I expect the same for those impacted by the current flooding in the mid west.


These homes should never have been built in these areas to begin with but now they are stuck and it will get worse. Rebuilding in these areas shouldn't be an option.

https://www.nytimes.com/2019/06/08/c...insurance.html
After Superstorm Sandy a lot of NJ and NY politicians used their clout to pressure FEMA to ease off flood zone changes to affected areas because it would "cost too much".

With regards to your ending statement, there are some good articles out there on FEMA "repetitive risk properties" so there has been some positive movement on the issue you correctly bring up.

Lastly, one of the major causes of more extreme flooding around those areas is the building of more and more floods and levees which protects one area but exacerbates the impact downstream. I linked to this in another thread last week where Elizabeth Warren was saying stupid things. Oh and the link was to an NPR article from about a year ago.

In short, a lot of the recent flooding is indeed do to man-made causes but it's mostly engineering driven. (Again, per NPR article not breitbart) So don't fall for all the global warmng grandstanding oing on.
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Old 06-11-2019, 01:38 PM
 
Location: Long Island
33,264 posts, read 14,037,836 times
Reputation: 7120
Quote:
Originally Posted by Mathguy View Post
After Superstorm Sandy a lot of NJ and NY politicians used their clout to pressure FEMA to ease off flood zone changes to affected areas because it would "cost too much".

With regards to your ending statement, there are some good articles out there on FEMA "repetitive risk properties" so there has been some positive movement on the issue you correctly bring up.

Lastly, one of the major causes of more extreme flooding around those areas is the building of more and more floods and levees which protects one area but exacerbates the impact downstream. I linked to this in another thread last week where Elizabeth Warren was saying stupid things. Oh and the link was to an NPR article from about a year ago.

In short, a lot of the recent flooding is indeed do to man-made causes but it's mostly engineering driven. (Again, per NPR article not breitbart) So don't fall for all the global warmng grandstanding oing on.
I know some people who dropped their flood insurance when their mortgage was paid off, then Sandy came along and they begged for help and were rewarded with taxpayer dollars. Yes some politicians have been fighting to slow the increase in cost of flood insurance that was on passed a few years ago, not just NY but up and down the east coast. Some flooding is caused by man some by nature but either was they seem to be increasing although there is no solid metric but we do know that the budget for these disasters is increasing, Problem is more people are dropping policies when they should be increasing.


Cities like Houston are good examples of rebuilding properties with repetitive risk. I don't want to turn this into a climate change thread but when it rains for 2 months straight as was the case in the Midwest I don't see engineering as the problem.


Politicians are slowly coming around but they hate to give out bad news to their constituents.
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Old 06-11-2019, 02:01 PM
 
Location: Barrington
46,145 posts, read 34,205,178 times
Reputation: 15389
Quote:
Originally Posted by Goodnight View Post
This has been an ongoing problem and if anything it has worsened since insurance has gradually risen with commensurate risk. Many owners particularly low income have dropped policies and others that haven't experienced a disaster in a few years get a false sense of security. A good percentage of people that were devastated by the California fires last year cant afford to rebuild, I expect the same for those impacted by the current flooding in the mid west.


These homes should never have been built in these areas to begin with but now they are stuck and it will get worse. Rebuilding in these areas shouldn't be an option.



https://www.nytimes.com/2019/06/08/c...insurance.html
Reportedly, about 35% of residences are owned, free and clear.

The rest are mortgaged. Lenders require the owner to maintain flood insurance if the residence is located in a flood plain.

Congress made a big push in 2012 to reform FEMA and better align premiums with risks. Then their constituents pushed back, hard. So grandfathering was restored and increases in premiums capped.

The National Flood Insurance Program closed fiscal 2018 with $21 billion in debt and $375 million cost per year to service that debt. As it is currently designed there is no way for NPIP to ever repay that debt.

And the next big storm will put them at the Treasury Window for more.
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Old 06-11-2019, 02:11 PM
 
Location: Barrington
46,145 posts, read 34,205,178 times
Reputation: 15389
Quote:
Originally Posted by Volobjectitarian View Post
1) Floods are not caused by climate change. They are a perfectly natural phenomenon.

2) Choosing to build where floods happen is a risk, and the consequences of that risk should be borne by the person choosing to take the risk, and exactly nobody else, ever. Taxpayers, as in he people being robbed at gunpoint by the government, should not be tasked with making sure people can escape the consequences of inherently risky choices.

3) If insurers were allowed to charge the proper actuarial rates for insuring against floods, more would, but the cost would be seriously high, which is why the government plays nanny welfare provider for that. Calculate your home's worth in 30 years according to a standard 1-2% annual appreciation equation, then add in the cost of everything in the home that you want covered by an insurer and multiply that number by 0.41 (.26 + .10 + .5 = .41, where 26% is the total chance in a 100 year flood plain that a flood will destroy the home, 10% is the insurer's profit margin and 5% is their cost to administer the policy)

For a $150k home, the cost of the policy over a 30 period would be ~$100k, and like any smart lender/insurer, the amortization schedule would be such that the insurer gets the bulk of their money back in the first 5 years. Using a standard mortgage calculator and amortizing for 30 years at the same percentage as the mortgage itself, a good ballpark cost for just flood insurance, if the private market were to do it profitably, would be about 2/3 of the mortgage payment itself, on top of the mortgage, taxes, homeowners insurance, any PMI or other admin stuff, etc. Because the risk exists, defined by FEMA, that in a 100 year plain over 30 years, 26% chance that house is destroyed and an insurer against that destruction would need to be able to make the insured whole at the time of the destruction. That's a big ask, since each year is an independent 1% chance of destruction, so they need to front load the amount in the recovery and mitigation pool. Welcome to insuring against known risk.

That's why the government jumped in, because they can ignore the profit margin, given their "gun in your face" revenue stream that is a guarantee, regardless of how well they serve you.
The Federal Government stepped in when the private sector declined to insure the risk. Developers of coastal properties were primary beneficiaries.

The Federal Government has subsidized premiums all along.

NFIP carries $21 billion in debt and are stretched to cover the $375 million in interest payments.

Only thing certain is NFIP will be at the Treasury Window to borrow more after the next big storm and the next and the next.
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Old 06-11-2019, 02:21 PM
 
52,112 posts, read 41,953,123 times
Reputation: 32530
Quote:
Originally Posted by Goodnight View Post
I know some people who dropped their flood insurance when their mortgage was paid off, then Sandy came along and they begged for help and were rewarded with taxpayer dollars. Yes some politicians have been fighting to slow the increase in cost of flood insurance that was on passed a few years ago, not just NY but up and down the east coast. Some flooding is caused by man some by nature but either was they seem to be increasing although there is no solid metric but we do know that the budget for these disasters is increasing, Problem is more people are dropping policies when they should be increasing.


Cities like Houston are good examples of rebuilding properties with repetitive risk. I don't want to turn this into a climate change thread but when it rains for 2 months straight as was the case in the Midwest I don't see engineering as the problem.


Politicians are slowly coming around but they hate to give out bad news to their constituents.
Honest question, how do they "seem" to be increasing? I don't think they have been, but coverage certainly has because climate change is a popular topic that generates ratings. So, every single thing that occurs is "climate change". (Please note I'm not denying warming.)

Ask yourself, just how FAST do you think climate change is? Because to believe current memes it's being measured in years instead of decades or centuries and a lot of that is frankly good intentioned lying.

Additionally, people claim the storms are worse than ever but again that's mostly historical ignorance. Storm hit NY area around 500 years ago shortly before Columbus showed up that had an estimated storm surge about DOUBLE Sandy so let that grim information sink in.
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Old 06-11-2019, 02:26 PM
 
66,710 posts, read 30,489,232 times
Reputation: 8717
Quote:
Originally Posted by middle-aged mom View Post
Reportedly, about 35% of residences are owned, free and clear.

The rest are mortgaged. Lenders require the owner to maintain flood insurance if the residence is located in a flood plain.

Congress made a big push in 2012 to reform FEMA and better align premiums with risks. Then their constituents pushed back, hard. So grandfathering was restored and increases in premiums capped.

The National Flood Insurance Program closed fiscal 2018 with $21 billion in debt and $375 million cost per year to service that debt. As it is currently designed there is no way for NPIP to ever repay that debt.

And the next big storm will put them at the Treasury Window for more.
There are very specific "grandfathering" rules. Most properties will not qualify:

https://www.fema.gov/media-library-d...ts_03_2016.pdf
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Old 06-11-2019, 02:34 PM
 
7,006 posts, read 2,557,933 times
Reputation: 3830
Quote:
Originally Posted by middle-aged mom View Post
Only thing certain is NFIP will be at the Treasury Window to borrow more after the next big storm and the next and the next.
Indeed.

But I maintain that private insurers would offer flood insurance, if they were allowed to charge actuarially profitable rates, it's just how high those rates would be that would make people fall over with heart failure, because uhm...math and stuff.
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Old 06-11-2019, 03:56 PM
 
Location: Long Island
33,264 posts, read 14,037,836 times
Reputation: 7120
Quote:
Originally Posted by Mathguy View Post
Honest question, how do they "seem" to be increasing? I don't think they have been, but coverage certainly has because climate change is a popular topic that generates ratings. So, every single thing that occurs is "climate change". (Please note I'm not denying warming.)

Ask yourself, just how FAST do you think climate change is? Because to believe current memes it's being measured in years instead of decades or centuries and a lot of that is frankly good intentioned lying.

Additionally, people claim the storms are worse than ever but again that's mostly historical ignorance. Storm hit NY area around 500 years ago shortly before Columbus showed up that had an estimated storm surge about DOUBLE Sandy so let that grim information sink in.
There is more moisture in many areas like the mid-west, some of these areas had multiple floods in the last few decades. I wouldn't point to one year or one storm as proof as it does take time but multiple events over decades add up.
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