Re-Thinking Disaster Bailouts

One of the now outdated vestiges of our former geological epoch, the Holocene, is disaster relief where governments federal and state or federal and provincial disburse large sums of cash for people devastated by severe weather events, notably floods.

The old policy made sense when these were "once in a century" events. However that was the Holocene and now we've moved into a geological epoch of our own making, the Anthropocene. One of the features of the Anthropocene is a new climate in which severe storm events of all descriptions of greater frequency, intensity and duration become commonplace, not rarities, not freak events.

Americans, especially in the hurricane, tornado, drought and flood ravaged south, are coming to face this new reality, their "new normal." An article in The Chicago Tribune illustrates their predicament.

There is a house in Spring, Texas, just outside of Houston, that has achieved a certain distinction for being flooded again and again. Over the years, reports The New York Times, it has been repaired no fewer than 19 times, costing the federal flood insurance program $912,732. Its actual value? Just $42,000.

But that’s not such a rare distinction. A house near Baton Rouge, La., worth $56,000 has flooded 40 times, according to The Washington Post, racking up $428,000 in claims. A property near St. Louis assessed at $90,000 has sopped up $608,000 in payouts.

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The National Flood Insurance Program is under enormous strain right now because of the devastation wrought by hurricanes in Texas, Florida and Puerto Rico. But it was in trouble already — nearly $25 billion in debt and obligated to provide coverage in places and on terms that guarantee more heavy losses.

The federal program was established in 1968 to provide coverage that private insurers had abandoned. It serves the important purpose of saving property owners hit by unforeseen disasters from financial ruin. But it has failed to protect taxpayers from endless unnecessary claims in areas prone to flooding, notably along the Gulf Coast and the Mississippi River.

Unreasonably low rates mandated by Congress are one problem. Another is the eligibility of policy holders for repeated payouts. “Repetitive loss” properties account for 1 percent of those covered but nearly a third of reimbursements.

Climate change may be a theological issue in the United States but the worsening of severe storm events is not in dispute. Dollar tags don't lie. And so Congress is looking at reforms. One proposal is to set a cut off whereby aggregate payments will be capped at three times a home's value. After that you'll be on your own.

The article questions whether Congress will have the spine to act.