NCPA - National Center for Policy Analysis


September 23, 2005

It is misleading to call hurricanes like Katrina natural disasters since storms only become disasters if they hit population centers, says USA Today. These days, there is not much chance a major hurricane could come ashore in the United States and not become a disaster, since 54 percent of Americans live within 50 miles of a shoreline and by 2025, 75 percent of Americans will live in such communities, according to the National Oceanic and Atmospheric Administration.

This unprecedented march to the sea has been abetted by unwise government policies that encourage living along the coast. Principal among them is the National Flood Insurance Program (NFIP), says USA Today.

  • Started in 1968, federal flood insurance subsidizes development in coastal areas and other regions subject to flooding by offering insurance at bargain rates underwritten by the government.
  • As of last year, about 4.6 million policies were in effect with an average annual premium of $438, an amount nowhere near enough to cover the program's losses.
  • Congress recently authorized NFIP to borrow $3.5 billion for Katrina related payments, an amount most experts believe is just the beginning and few believe will be repaid by property owners.

USA Today says the program not only brings big government into an area better left to private enterprise, it also achieves the opposite of its goal. By lowering the cost of maintaining a home on flood-prone lands, it increases the population in these areas, leading to more, and more costly, disasters.

The government has a vital role in identifying flood-prone areas, but the actual issuance of policies should be left to the private sector. Yet, after 37 years, it is time to recognize federal flood insurance for what it is: a disaster, says USA Today.

Source: Editorial, "How You Pay for People to Build in Flood Zones," USA Today, September 21, 2005; and Christy G. Black, "Subsidizing Disaster," National Center for Policy Analysis, Brief Analysis No. 525, September 7, 2005.

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