Repeat Claims Strain Federal Flood Insurance
Tuesday, October 11, 2005
DAUPHIN ISLAND, Ala. -- In September 1998, Hurricane Georges swept up a beachfront house along the Gulf of Mexico and tossed it like a bowling ball into John and Gail Leacy's summer home on the western edge of this barrier island. The Leacys collected thousands of dollars in federal flood insurance and rebuilt.
Last year, Hurricane Ivan slammed their Creole-style three-bedroom cottage with wind and floodwaters. And in late August, a wall of water from Hurricane Katrina severely undercut the house's concrete pad and pilings.
"We're still standing, but we're pretty severely damaged," Gail Leacy said from her year-round home in Mobile, Ala. "We hope we can save her."
Dauphin Island is one of the most vulnerable barrier islands in the nation. Since 1979, it has been struck by six hurricanes and has lost nearly 500 expensive vacation homes and rental properties. Yet owners keep building back, trying to elevate their homes out of harm's way. And the island has received more than $21 million in federal flood payments to help spur redevelopment.
Now, after Katrina, Leacy and hundreds of other Dauphin property owners will join thousands of others in the Gulf states filing claims against their federally backed flood insurance, putting enormous financial strain on the government-run program.
The National Flood Insurance Program was established by Congress in 1968 to cover property owners who build in flood-prone areas, which are considered too great a risk by private insurers. It followed years of devastating floods and political debate over whether the government should step in to offer insurance.
Nearly from its inception, the program has struggled to pay all its claims. It collects $2 billion in annual premiums but has no reserves, heavily subsidizes some of its riskiest customers and relies on the Treasury to bail it out when losses exceed income. Losses this year from Katrina and Hurricane Rita alone could top $10 billion, experts say, forcing the program to borrow billions from taxpayers with no guarantee of repayment.
Many claims will come from properties that flood repeatedly. As coastal development has increased and more storms have hit the area, properties with repeated losses along the Gulf Coast have been making a growing share of the claims against the government-backed program, according to a Washington Post analysis of federal data. Among the tens of thousands of such properties are older buildings in cities such as Houston and New Orleans, and in small outlying towns. Thousands of others are in resort communities such as Dauphin Island. Overall, the five Gulf Coast states account for $6 billion in claims since 1978 -- half of the total nationwide.
Officials at the Federal Emergency Management Agency, which administers the flood program, say they cannot prevent anyone from building in a flood-prone area. They can only set building and elevation rules for property that qualifies for federal insurance. They say those requirements save taxpayers $1 billion a year in disaster costs.
Some researchers, however, question that assertion and say that FEMA's policies feed a vicious circle: They enable a boom in coastal development that leads to increasingly costly flood insurance payments that in turn fuel even more development. The researchers argue that FEMA and Congress ought to make such programs contingent on communities doing everything possible to lessen risks, including pulling back from the shoreline.
"If ever there were a poster child for a barrier island that shouldn't have been developed, it's Dauphin Island," said Orrin H. Pilkey, a Duke University coastal geologist. "But it did, and now we all keep paying for it."
Not Building High Enough
The western end of Dauphin Island, where the Leacy house overlooks the Mississippi Sound, is little more than a sandbar. John Leacy, a retired builder, said that when he erected the house in 1985 there was a 200-foot beachfront on the Gulf side.