10 years after Hurricane Katrina, federal program is still financially crippled
More than 10 years have passed since Hurricane Katrina hit the United States, and many homeowners are still reeling from the damage caused by the catastrophe. Homeowners faced one of the most expensive disasters in the history of the country and its insurance industry, with some $80 billion in losses, with another $16.1 billion in flood insurance claims. The hurricane, as well as other storms that hit the country between 2008 and 2012, caused serious problems to the National Flood Insurance Program that it has not yet recovered from.
National Flood Insurance Program is $24 billion in debt
Currently, the federal program, which is typically the only place that homeowners can find flood insurance coverage, is now $24 billion in debt. This debt means that the program is struggling to balance the need for actuarially sound rates and inexpensive premiums for homeowners and businesses. Federal lawmakers have attempted to solve the program’s financial problems, but have largely failed in this endeavor.
Swiss Re believes that private insurers could provide flood protection
Swiss Re believes that the private market may be able to reduce the financial strain on the National Flood Insurance Program. Monica Ningen, head of property for the Americas and Canada for Swiss Re, notes that the federal program was established in 1968 with the belief that floods represented an uninsurable risk. Due to advances in technology and science, Ningen believes that insurers are now more capable of handling the risks associated with flooding disasters.
Establishing a private flood insurance market continues to be a difficult prospect
Floods are the most common disaster in the United States and some states are working to establish a private flood insurance market in order to adequately protect homeowners and businesses. Establishing a private market may be difficult, however, as the rates offered through the federal program are still too low for private insurers to compete with. While rates remain relatively low, they are growing at a steady pace as the federal program works to recover from the financial losses of the past.