When the national flood-insurance program was created in 1968, no private insurers would write policies to cover homes and businesses built in vulnerable, low-lying areas. That is still the case.
Since Hurricane Katrina, the program has racked up enough losses to be $25 billion in the hole.
Two major changes brought about by the Biggert-Waters Flood Insurance Act of 2012 have created a national controversy with implications for Rhode Island.
The maps defining the areas considered flood zones were redrawn, taking into account new assumptions about sea level, and the strength and frequency of storms. The second was the phased removal of significantly subsidized insurance rates.
The effect has been sticker shock for many homeowners, who have seen the projected new insurance rates jump by as much as $50,000 per year, in many cases making their properties unsellable.
While there is little question below-market flood-insurance rates are not good public policy, there is a lot of pain being felt by people who have built their lives based on that assumption. In situations in which a home is a family’s largest asset, the change in the law operates effectively as a public taking of property with no compensation.
Some in Congress want to delay implementation of Biggert-Waters and study the economic effects. That is a prudent approach, but it should not block the end result of a flood-insurance program that is sensible and sustainable. Perhaps one way to approach the transition is to means-test the rate structure. But it should also include a forum to discuss the question of whether or not homes and businesses should be rebuilding along these vulnerable areas at all. •
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