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Originally Posted by magictoy
Thank you for a great post, Jazzman. I hope you don't mind if I send excerpts to some friends in Florida.
I have quite an opinion in regard to people who repeatedly rebuild in an area that periodically gets destroyed by hurricanes or flooding. Often the cost of the rebuilding is borne by the taxpayers. I don't know if you've ever addressed that directly, but you do so indirectly with your post.
The other philosophy not directly addressed here is that people should depend on the government to take care of them. It's not surprising that wilravel is so in favor of that, but it would be nice for someone to name some countries where that philosophy has actually worked.
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Send it to whoever. I've got more detail if needed. I'm by no means an expert in that area, but I work very closely with some experts and I keep my ears open.
As far as people that build in troublesome spots, let me point out that you neglected to include earthquakes, which are actually viewed as very similar to hurricanes by the industry. Actually the prices for CA earthquake coverage have substantially increased because of the 2005 storms. That's because the reinsurance treaties (the contracts to lay off risk for entire books of business) for both FL wind and CA earthquake are generally written together because the same players are interested in high risk/high dollar programs.
I think that you're referring the National Flood Insurance Program, which is the only entity legally able to write flood coverage in Flood Zone A in the US. That was created at the insistence of the insurance companies because they started to refuse to give flood coverage for buildings in Flood Zone A (and B to some extent). The term "flood" can mean a lot of things, but it generally means non-wind-driven water or water that comes from the ground up (so rain isn't included). If your neighbor leaves his sprinkler on too long and it floods your basement. Or if a dam breaks. Or a real flood. Unless you buy special coverage (like from the NFIP), you don't have coverage. However, a lot of people decide not to buy the coverage (or not enough), and they're the ones that are usually SOL.
Interestingly enough, if you take all of the high risk property areas (coastal wind hazard inland to 5 miles from Brownsville, TX to Maine, Flood Zone A and fault zone areas including S. CA, W. WA, the New Madrid fault, etc.), you're suddenly talking about a very statistically significant minority of all the homes and businesses in the country. It's something like 20% of all property values in the country, but I haven't looked at the number in a while. It could be higher or lower than it used to be. If a 7.0 earthquake hit LA the same year that a Catagory 2 hurricane rolled through Manhatten or Boston (neither is an abnormally strong event) there are probably 5 insurance companies and another 5 reinsurers that would immediately tank.