Risk Estimate Led to Few Flood Policies
Monday, October 17, 2005
NEW ORLEANS -- Many of the thousands of homeowners in the Lower Ninth Ward, one of the hardest-hit areas in the city, lacked flood insurance because the neighborhood in theory was supposed to be relatively safe, local insurance agents and residents said.
Most of the area sits outside the "high-risk" flood districts designated on federal maps used for insurance, and so, unlike homeowners elsewhere in this low-lying city, most in the Lower Ninth Ward were not legally required by lenders to buy flood coverage.
Those federal insurance maps, however, were based on a vastly mistaken assumption: that the levees and flood walls protecting the neighborhood from inundation would remain intact. When the levees breached near the Lower Ninth, the floodwaters ravaged countless homes unprotected by flood insurance, and many neighbors wonder whether anyone will have the wherewithal to rebuild.
In communities all along the Gulf Coast, the shape and extent of the recovery -- or neighborhood abandonment -- may depend largely on who had flood insurance and who did not.
Hurricane Katrina was one of the most destructive storms to strike the United States in 50 years. Now some insurance experts say it is likely to be the most difficult from which to recover because a relatively small portion of the economic damage is covered by insurance.
Robert P. Hartwig, chief economist at the Insurance Information Institute, an industry group, has tallied insurance payouts after natural disasters in the United States, Western Europe and Japan.
On average, private insurance covers 62 percent of the economic losses after natural disasters in those places, he said. But in New Orleans, he expects that insurance will cover less than half of the losses -- and perhaps much less than that -- because of the magnitude of uninsured flood losses.
"It will probably be the lowest percentage of coverage for a major natural disaster in the U.S. for the last half-century," Hartwig said. "Unfortunately, the level of coverage in New Orleans is likely to be somewhere between the Western countries and the Third World -- where places can be affected for years, if not decades, by natural disasters."
Homeowners in the Lower Ninth Ward are becoming acutely aware of the difficulties of rebuilding without insurance. While insurance has begun paying for repair crews in more-affluent areas, they fear their working-class neighborhood could become a ghost town.
"Lots of people will lose their homes," said Mary Hammothe, 48, a bank processor whose roof has a hole where her son cut his way out of the attic.
"I lost two jobs with Hurricane Katrina," said Cynthia Minor, 45, a pharmacy technician who lives nearby. "I don't have any money to rebuild. Who does?"
Among the key factors determining whether a homeowner buys flood insurance are the complex maps created by the Federal Emergency Management Agency and adopted by communities.