California has nearly seen the last of the relentless streak of storms that have inundated the state since late December, dragging dozens of thousands evacuations, at least 20 dead and an estimate $1 billion in damages.
From failing levees in Merced and Sacramento counties in the Central Valley to overflowing rivers along the coast, the rains affected nearly every part of the state, with many areas receiving four to six times above-average rainfall in recent weeks. Mudslides closed major roads, thousands of homes were flooded and trees downed power lines, with more than 13,000 electric customers have not yet resumed service on Tuesday afternoon.
Meteorologists expect that by Thursday, the last storm, this time weaker, will have disappeared from northern and central California. But in the coming weeks, as the floodwaters recede and the full impact of the rains is felt, many residents could find themselves facing a second crisis: a widespread lack of flood insurance that will leave thousands of homeowners struggling with the cost of repair and rebuilding. houses.
“California is a place where you worry about water scarcity, not abundance,” said Rebecca Elliott, a professor at the London School of Economics who wrote a book on flood insurance in the United States. “Many, thousands of Californians will assume they have flood coverage and find that they don’t.”
Standard home insurance does not include flood coverage, although according to a recent study, 47% of Americans think so. Only 1.33% of California households have stand-alone policies through the National Flood Insurance Program, a federally run system that accounts for 95% of flood coverage in the United States. The share of private flood policies in California is even lower. Yet at the start of the month, 90% of the state’s population was under flood watch.
The Federal Emergency Management Agency, or FEMA, requires homeowners with mortgages underwritten by the federal government to carry flood insurance if they are in what it designates as “special flood hazard areas.” flood”. It’s basically the 100-year floodplain, or the places that have a 1% annual risk of flooding. But the maps that FEMA uses to delineate these areas are wildly obsolete. First Street Foundation, a non-profit organization that models flood risk, discovered that there were 5.9 million owners nationwide that face substantial flood risk outside of official FEMA hazard zones.
“I show them the topographic maps,” Nick Ramirez, an insurance agent based in Los Angeles, said of his clients who aren’t required by law to carry flood insurance. “I say, ‘Do you want to protect yourself?’ Some say yes, and others roll the dice.”
FEMA’s California maps, most of which were last updated in the 1980s and early 90s, if not before, leave out about 80% of the state’s rivers and streams. They also do not take into account the worsening effects of climate change, which includes an increased risk of flooding as the climate system shifts towards hydrological extremes. Part of the reason they haven’t been updated is the expense. Communities have also often resisted the expansion of floodplains to avoid costs to landowners and restrictions on development.
When FEMA requires mandatory insurance, the policy is under-enforced. Flood insurance requirements do not apply to mortgages that have been paid off or properties purchased with cash. And experts say it’s common for homeowners to let their policies expire because mortgage companies don’t check them. According to Elliott, the fact that lenders are securitizing their mortgages may be one of the reasons they are not paying close attention. “They cut up these mortgages, bundle them up and resell them,” she said.
In recent years, the number of Californians with flood insurance policies has declined in line with a national trend. Experts attribute this largely to premium costs, and in particular to an increase in insurance rates that occurred from October 2021 under FEMA’s new rating methodology called Risk Rating 2.0. .
The National Flood Insurance Program, or NFIP, has long struggling with debts, the result of worsening weather-fueled disasters associated with static insurance premiums. With Risk Rating 2.0, FEMA reassessed flood risk using independent models, then adjusted prices to better reflect current trends. The idea, according to the agency, was to make insurance fairer, so people in flood-prone areas pay more based on their level of risk, and people outside don’t have to subsidize them. (The new cards did not affect who was required to hold a policy.)
The result, however, was a precipitous decline of policies. “We have seen a nationwide decline in the number of people with flood insurance [for several years]”said Nick VinZant, principal research analyst at QuoteWizard, an online platform that allows customers to buy and compare insurance prices. “It really started to come down as soon as FEMA implemented Risk Rating 2.0.”
Even if the state as a whole paid less under the new program than before, 73% of California policyholders saw their prices increase, in some cases by as much as $100 a month. Between March 2021 and August 2022, 11% of those insured in the state dropped out of the plan, one of the biggest drops nationally, according to VinZant. (Nationally, the program lost 6% of policyholders over the same period).
FEMA doesn’t provide zip code-level data on policies in force, so it’s hard to confirm that the places where premiums have increased the most are the same places where people have dropped out of the NFIP. But most experts think that’s what happened. “FEMA was very opaque. The numbers they gave were limited, so it’s hard to keep track,” said Nicholas Pinter, professor and associate director of the Center for Watershed Sciences at the University of California, Davis. “There are strong suspicions that the increase in premiums has led to an exodus from the program.”
Another driver of the exodus: the multi-year mega-drought that is drying up rivers and reservoirs in the western United States. Typically, flood insurance underwriting increases after a flood and decreases in dry years when people forget about the potential for a flood. “Right now my phone is ringing non-stop,” Ramirez said.
FEMA is working with the drought explanation. “Many factors could influence this drop in the number of insured, including the economic impact of the pandemic, inflation, the housing market, affordability or the purchase of flood insurance in the private market. “said David Maurstad, deputy associate administrator of resilience for FEMA, Grist said in a statement. “For California in particular, [it may be] due to the several years of drought in the region and the belief that flooding may not affect them.”
Given the increasing frequency of floods and the rising cost of repairs, Elliott believes it is unrealistic to expect the National Flood Insurance Program to operate like a private insurance company, charging enough to cover its risks and cushion its losses, while remaining affordable. In California, the average cost for this insurance is $779 per year, although rates vary by region. Research by Pinter and his colleagues shows that in addition to a small number of riverside communities like Malibu that have lots of at-risk properties and high incomes, most of the state’s flood exposure is in low-income areas.
The national program tries to encourage more flood-resistant construction and planning by offering grants and reduced rates to people and communities who take certain steps to protect their homes. But these investments can be costly, and the agency has been criticized for not providing enough available and accessible support. “We expected [the NFIP] to support the American dream of homeownership while expecting it to signal risk, keep people away from the water’s edge, and reduce overall exposure to flood risk,” said Elliott. “He always had a hard time doing all these things. She says a better approach would be to see insurance as part of a larger strategy and set of policies to protect people from flooding.
On Saturday, President Biden approved California Governor Gavin Newsom’s request for a major disaster declaration in three counties, following the state declaration of emergency for 41 of its 58 counties. Merced, Sacramento and Santa Cruz are now eligible for grants for temporary housing and home repairs, low-cost loans to help cover uninsured property losses and additional forms of support. More counties could be added as authorities continue to assess damage across the state.