Six Things 9.19.23

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The Crisis in Flood Insurance

Paul Carroll, Editor-in-Chief of ITL

The flood insurance crisis in the U.S., which has been described as a "slow-moving hurricane," has made landfall, hitting Louisiana especially hard.

Rising premiums, to reflect soaring claims from natural catastrophes, are now hitting consumers hard enough that Louisiana and nine other states have sued to block increases in national flood insurance rates. Those increases are limited to "only" 18% a year but could eventually total?more than 700%?for many homeowners and businesses and cause an exodus from southern Louisiana, according to testimony at a hearing last week.?

Politicians can be expected to use regulation to protect consumers -- also known as voters -- as long as possible, but, beyond some short-term issues, insurers can't be forced to lose money. Government officials may also decide to subsidize homeowners' insurance policies, but that isn't a long-term strategy, either. Those taxpayers whose flood insurance premiums stay the same or even decline will resist subsidizing those who choose to live with greater risks.

Something has to give. We may finally see consumers start to change their behaviors, either leaving risky areas or fortifying their homes and businesses.??

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