10 surprising — and irritating — facts about flood insurance

Volunteers search for survivors in the flooded streets of Gentilly after Katrina left New Orleans in ruins. Claims from that one storm put the federal flood insurance program in the red.
Volunteers search for survivors in the flooded streets of Gentilly after Katrina left New Orleans in ruins. Claims from that one storm put the federal flood insurance program in the red.
Published Oct. 2, 2013

Florida didn't create the crisis that will force thousands of Floridians to pay astronomical amounts for flood insurance starting today. Instead, blame a few devastating storms — Katrina, Rita and Sandy — that largely spared Florida but slammed into Louisiana and the Northeast.

There is plenty of confusion and misinformation over how the flood program got into this mess and why Florida is being hit harder by rate hikes than any other state. Here are 10 facts to help sort through the clutter:

1 FLORIDA GIVES WAY MORE THAN IT GETS: Since 1978, Floridians have paid four times more in flood insurance premiums than they've gotten back to cover losses. More than $16 billion in premiums compared to $3.7 billion in claims. By contrast, Louisiana property owners have paid about $4.5 billion in premiums while receiving more than $16 billion, due largely to Hurricanes Katrina and Rita in 2005. Louisiana, alone, has received more than 40 percent of flood claims paid out nationally since 1978.

2 THAT'S TRUE LOCALLY AS WELL: Take St. Petersburg. There hasn't been severe widespread flooding since Tropical Storm Josephine in 1996, yet the city's residents are paying $33.5 million in premiums this year alone.

3 THE FLOOD PROGRAM WAS DOING JUST FINE: The program was solvent from 1986 to 2004, with more premiums coming in than were paid out.

4 THEN ALONG CAME KATRINA: The flood program paid more for losses from Hurricane Katrina than for all other flood events combined prior to 2005. Katrina pushed the flood program into the red, forcing it to borrow nearly $18 billion from the U.S. Treasury.

5 FLORIDA HURRICANES AREN'T THE PROBLEM: Of the top 15 "significant flood events'' covered by the program since 1978, only one was for a hurricane that caused major flood damage in Florida (2004's Ivan). Historically, hurricanes that strike Florida cause more wind damage than flooding. That was true for Hurricane Andrew in 1992 and Charley, Jeanne and Frances in 2004, none of which placed in the top 15 flood events.

6 TAXPAYERS DON'T SUBSIDIZE FLOOD Policies IN FLORIDA: Or anywhere else for that matter. Not a dime of U.S. taxpayer money has been lost on claims, which have totaled about $50 billion nationwide since 1978. That could change if the U.S. Treasury Department "forgives'' the $24 billion the program currently owes but that appears unlikely.

7 THE FLOOD PROGRAM IS AN ODD DUCK: Unlike private insurers like State Farm, the program can't cherry-pick customers to reduce its risk. It is required to take all "eligible'' homeowners, that is, everyone living in a flood plain. Nor is the program allowed to limit its risk by selling catastrophe bonds or buying "reinsurance'' — insurance for insurance companies. All claims are supposed to be paid from premiums.

8 A FEW ACCOUNT FOR A LOT: Properties that experience repeated flooding account for only 1 percent of policies but about 33 percent of paid claims. Since 1979, a total of 157,225 so-called "repetitive loss properties" have had 461,580 paid claims totaling $11 billion.

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9 FLOOD INSURANCE REDUCES DISASTER ASSISTANCE: The more claims paid through the flood program, which is funded by policyholders, the less money will be spent on federal disaster assistance, which is funded by taxpayers. From 1986 to 2009, excluding the extraordinary year 2005, the program paid $17.8 billion in insurance claims that otherwise would have greatly increased taxpayer-funded disaster assistance.

10 YOU HAVE TO WORRY EVEN IF YOUR HOUSE ISN'T IN A FLOOD ZONE: FEMA has begun remapping flood zones across the country. Pinellas County is due for a remapping in 2015. Property owners used to be grandfathered in to keep their lower rates if their home was rezoned into a flood-prone area. Grandfathering is slated to go away under Biggert-Waters.

Sources: FEMA, Congressional Research Service, National Flood Insurance Program Actuarial Rate Review, American Academy of Actuaries, flood insurance subcommittee; the Wharton Center at the University of Pennsylvania.

Compiled by Times staff writers Susan Taylor Martin and Jeff Harrington.