Lex FloodReady

The Need

FEMA’s NFIP owes taxpayers over $25 billion for claims paid and expenses that exceed the flood insurance premiums the program has charged since 1973. Just 1% of the NFIP insured properties are responsible for half of the insurance program’s $25 billion debt – an alarming statistic. Properties that flood more than once are the problem properties, responsible for $12.5 billion debt for the National Flood Insurance Program (NFIP).

That 1% of repeatedly flooded properties makes up about 25% of all NFIP claims. And of those properties in the 1%, about one in 10 have actually received payments worth more than their value, according to Pew research – such as one Mississippi home worth $69,000 which has been flooded 34 times in 32 years, resulting in $663,000 in claims.

The number of insured repetitive loss properties in the National Flood Insurance Program increased from 41,443 in December 1999 to 70,226 in December 2007. Nearly 43% of these properties, and 59% of insured severe repetitive loss properties, are located in Florida, Louisiana, and Texas.

FEMA and its state and local partners have mitigated nearly 15,000 repetitive loss properties since 1978, but an average of 5,188 new repetitive loss properties have been added each year outpacing FEMA mitigation efforts by a factor of 10 to 1. The number of insured properties annually incurring second and third flood losses has increased by 68% and 57%, respectively, over the past 20 years.

The number of repetitive loss claims, and the average amount of each claim, has increased over the last 8 years. FEMA has paid an average of $35,200 for 20,004 repetitive loss claims each year from 1999 to 2007, costing the National Flood Insurance Program $705 million annually. Through 2007, the National Flood Insurance Program had paid $9.1 billion for 405,049 repetitive flood loss claims at an average claims payment of $22,500. That figure has now grown to $12.5 billion and continues to increase.

Conclusion: Office of Inspector General,U.S. Department of Homeland Security,Washington, DC 20528 March 26, 2009

FEMA and other stakeholders encourage flood mitigation in a number of ways, but it is difficult to compel property owners in high-hazard areas to mitigate.

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