Featured Article: Flood Insurance Gap (October 30th, 2024)
Congressional Communities is featuring one Congressional Research Service (CRS) article per day in effort to share with our readers the wealth of information that the CRS makes readily available.
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Today’s featured CRS article, “Closing the Flood Insurance Gap,” explains the flood insurance gap, which is the gap between the amount of people exposed to flood risk and the amount of people actually insured against floods, with the former being much higher than the latter. The report includes several tables that depict the rates at which people are insured or in areas designated to be at risk of flood. This article falls under the issue area of Emergency Management. From the CRS:
There is a large flood insurance gap in the United States, where many people exposed to flood risk are not covered by flood insurance. Early estimates suggest that very few people had flood insurance in areas flooded by Hurricane Helene, perhaps 1%-2% or less in inland counties and 21% in coastal counties affected by Helene.
The National Flood Insurance Program (NFIP) is the primary source of residential flood insurance. More than 22,000 communities participate in the NFIP, with more than five million policies providing more than $1.3 trillion in coverage. The NFIP identifies areas at high risk of flooding as Special Flood Hazard Areas (SFHAs). Property owners are required to purchase flood insurance only if (1) their properties are in SFHAs, (2) their communities participate in the NFIP, and (3) they have federally backed mortgages. However, the SFHA boundary may create a false belief that flood risk changes abruptly at the boundary and that properties outside the SFHA are safe and do not need flood insurance, but about 40% of NFIP claims are for properties outside SFHAs.
The issue of high uninsured losses is not a new problem. For example, in the October 2015 South Carolina floods, the average NFIP penetration rate in counties with a federal disaster declaration was 5% (Table 1). Nearly 90% of policies in South Carolina were concentrated at the coast, but the flood damage was primarily inland, where few residents were insured (Figure 1).
Interested readers can find the full article here.
