Flood Insurance

Sierra Club Says National Flood Insurance Is Totally "Wack"

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Row row row your boat

Today's New York Times has a front page article, "Storm Cost May Force Many from Coast Life," the tone of which basically advocates National Flood Insurance as just another middle-class entitlement program. The apparent problem is that the completely bankrupt federal insurance program is doubling its premiums in a vain attempt to cover its losses. The upshot, according to the Times, is that only the wealthy will be able to afford to live along the coasts. Yet, as the Times article reports one environmentalist lobby group not noted for its economic acumen gets it—the Sierra Club:

"The irony is, if we allowed market forces to dictate at the coast, a lot of the development in the wrong places would never have gotten built," said Jeffrey Tittel, director of the Sierra Club's chapter in New Jersey. "But we didn't. We subsidized that development with low insurance rates for decades. And we can't afford to keep doing that. Should a person who lives in an apartment in Newark pay for someone's beach house?"

The Sierra Club has left the cloud cuckoo land in which Congress dwells and has now joined Reason in the reality-based community. I praised an insightful Times op-ed that calls for ending federal flood insurance earlier today.

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  1. Apostasy!

    (I read that article this morning and loved the passage that you quote.)

  2. “The irony is, if we allowed market forces to dictate at the coast, a lot of the development in the wrong places would never have gotten built,”

    THAT IS NOT IRONIC

    1. Like rain on your wedding day, or a free ride when you’ve already paid?

      1. It’s even dumber than Miss Alannis’s idiocy, since there are no causal relationships in her song.

        1. Isn’t that ironic?

          1. This ^

            The most ironic thing about Ironic is that it contains no ironic lyrics at all. Morisette has been irony trolling everyone for years.

    2. But it is ironic – the irony is that the watermelons at the Sierra Club oppose the very market forces which would have prevented the development they also oppose.

      1. +1 for the watermelon reference

  3. There’s no irony, you nitwits. That’s the whole fucking benefit of market forces. It allow resources to be used in their most efficient manner.

    You simply can’t accept that, you fuck, because you think Adam Smith is Satan.

    1. No, Satan was Adam Smith. You have the causality all backwards.

  4. The apparent problem is that the completely bankrupt federal insurance program is doubling its premiums

    Did the Insurance Commission OK those premium increases? Sounds like some sort of coverage mandate is in order. This seems wholly unfair to working people. The premium increases are unfair.

    Did I hit all the bullet points?

    1. You missed needing a law to prevent landlords from passing those premium hikes on to tennants.

    2. Redlining — RRRRRAAAAAAAAAAAACIST!

  5. FTA:

    If there’s no ceiling on the cost of insurance, it may dissuade people from rebuilding or staying. It could depopulate Breezy, if not just the threat of storms increases, but the cost of living there increases dramatically.

    Yes. Exactly. You’d think that a “retired Wall Street executive” would understand the concept of price signals.

    1. If you can’t afford to live on the beach, you shouldn’t live on the beach.

      Your desire to do so does not create a claim on the public fisc.

    2. Or people would spend a lot of extra money up front on technological mitigation efforts during construction.

      1. Pilings aren’t all that expensive.

  6. The Sierra Club has left the cloud cuckoo land in which Congress dwells and has now joined Reason in the reality-based community. I praised an insightful Times op-ed that calls for ending federal flood insurance earlier today.

    Eh well, sometimes it’s frustrating being us.

    1. Don’t worry, they only left for a few minutes. They’ll be back in cloud cuckoo land any minute now.

  7. You know who else thought his political opponents lived in Der Wolkenkuckucksheim?

    1. Kaiser Wilhelm?

  8. Many people interpret ending federal flood insurance as tantamount to relocating 80 million people or (say) depopulating the entire state of Florida.

    It helps to point out why this is wrong. Without federal flood insurance, the market for flood insurance wouldn’t cease to exist. it would just mean that premiums would go up. That might make it prohibitively expensive to buy insurance in some extreme locations. But that wouldn’t mean people couldn’t live there. They just would have to take their risks and do without flood insurance.

    It’s just not accurate to believe that the entire population in every locaiton that has a flood plain would have to be relocated. There aren’t just two levels of risk – flood prone and not-flood-prone.
    Some places like New York with Sandy, are only going to experience something like this once in 100 years. Insurers will do the risk analysis and set rates accordingly.

    And as everyone knows, the people who get hit hardest by hurricanes are the people living RIGHT ON the coast. As in, within a few hundred meters. Not the people living a mile or two inland. That’s because ou go a milt or two inland and the land level rises above sea level by a few feet so the storm surge doesn’t rach that far. The insurers aren’t stupid and market forces are going to ensure that insurance gets offered to people living inland at lower rates than those actually on the beachfront.

    1. Further, cities that build flood walls and other barriers would likely see their premiums go down.

      So, in summary, contrary to what seems to be the popular paranoia, ending federal flood insurance wouldn’t result in the mass relocation of 80 million people from the entire eastern seaboard. It would at most, result in a relative depopulation of a narrow strip of land along the coast, leaving behind those who decide to forego expensive flood insurance, and those who can afford to pay it.

    2. Cost of risk really isn’t that complicated.

      Frequency x cost of event = annual risk cost.

      If a beach house is destroyed once 20 years and costs $200k to replace – the annual risk is $10k. You can set aside $10k a year or buy insurance (which will cost $10k plus a profit margin if the actuaries are accurate).

      If you can’t afford $10k of risk, you should live elsewhere.

    3. Many people interpret ending federal flood insurance as tantamount to relocating 80 million [blue state] people or (say) depopulating the entire state of Florida.

      *squints* I’m looking for a downside.

      1. The downside is hordes of Floridians and blue staters moving to soon-to-be-formerly decent neighborhoods.

        Looking at it that way, subsidized flood insurance is the price we pay to keep those people the hell away from us.

    4. That’s just not true. Non tropical cyclone flooding is almost a non-issue in FL. Tropical cyclone flooding, despite what you might think from watching the news, cost only a few millions in 2008-11. So there IS a way to amortize risk. Homestead (flattened by Andrew) has experienced one catastrophic storm in history. Tallahassee hasn’t had a major event since the early 80s.

      Yes, we could have two bad years. On the other hand, that’s why we have actuaries. To establish the actual aggregate risk and set prices accordingly.

      1. Right, but the problem is a LOT of people THINK it is true.

        Go read the comments on that NY Times editorical. You’ll find dozens of people talking about how ending flood insurance would force 80 million people to move.

        I myself have been in arguments with Floridians who insist that saying “if you can’t get insurance you should live there” is equivalent to saying “You shouldn’t live in Florida”.

        So if we want to convince people to end flood insurance, we have to start by proving that ending flood insurance wouldn’t require some sort of massive relocation program involving millions of people.

  9. “The irony is, if we allowed market forces to dictate at the coast, a lot of the development in the wrong places would never have gotten built,” said Jeffrey Tittel, director of the Sierra Club’s chapter in New Jersey.

    It’s not irony if you were wrong, and are now slightly less clueless and out of touch with reality, Jeffrey.

  10. I am reminded of P. J. O’Rourke’s wisdom regarding government subsidies – since you are smarter than the government when it comes to spending your own money, government subsidies encouraging you to do something you wouldn’t otherwise do are almost always a matter of the government paying you to do something stupid.

    1. Nonsense. People are too stupid to know how to spend their own money, so they need government (elected by those same people) to tell them how to spend what’s left after taxes.

  11. When I was a kid, we would go Cape Cod sometimes for vacations. The old vacation cottages were cheap little things a notch above shacks. It made them kind of cool to a kid and quaint.

    They were cheap cottages because people didn’t risk building expensive houses on a stormy coast.

  12. I don’t live at the water’s edge so I really don’t have a dog in this fight, but, one has to ask, what is going to happen to all the towns on, for example, the New Jersey barrier islands, particularly places like Atlantic City? I would not be surprised if many of them just turned into ghost towns.

    1. Uh no….just like New Orleans, they will be rebuilt at the expense of all of us who don’t live next to a stormy ocean. The media will gush about how the Jersey Shore is bouncing back from the hardship of Sandy, and it will be a Good Thing that with Just A Little Help From The Government, We were able to Rebuild This Cherished American Institution.

    2. Atlantic City wouldn’t turn into a ghost town. For one thing, a multi-story hotel isnt as suceptible to damage as a single-family home. Secondly, Atlantic City could build a seawall to protect it, which would make living there more viable.

  13. My ‘rent’s flood insurance in Boca is ridiculously cheap (couple hundred). I paid 4000.00 a year for a 3 bedroom, 1700 square foot rancher on the VA Peninsula that according to the yearly NFIP/FEMA statement, hadn’t flooded in the 30 years of records that had on the house.

    The politics of flooding in this area are interesting.

  14. I am not making excuses for flood insurance, but it isn’t the carte blanche coverage you might assume. If your house is more than 50% damaged in a flood it must meet certain requirements before it may be covered by flood insurance again. One of these requirements is elevation of the house and all of its important utilities above 100 year flood. At least that is how I read the regulations. Whether this rule applies or not is affected by when the house was built, but it is unclear to me exactly how that works. In our case, the rules applied to us and after our flood damage we got a letter explaining that we could not rebuild without elevation if we had been more than 50% damaged. There are also rules about multiple events less than 50%. It is complicated enough that I found to my dismay that my insurance agent didn’t really understand it.

    So the people on the beaches in New Jersey and New York may be shocked to find out that they have to put there house several feet in the air. This is not only very expensive, but there are not a lot of contractors who do that work. The waiting list will be long. I suppose that some giant exemption might be made for these areas given the political ramifications. Some sort of exemption must have been given to New Orleans, or it is hard to imagine any rebuilding taking place there.

    1. Correct me if I’m wrong, but my understanding is that huge swaths of New Orleans, such as the lower ninth ward really have not been rebuilt much at all. There are isolated cases of people rebuilding, with or without house raising. My understanding is that there are no exemptions. Some people just aren’t buying flood insurance or are relying on charitable organizatons to raise their homes.

      1. I don’t know what has happened in New Orleans, but if they received no exemption, I don’t know how they could rebuild. I also don’t know how you go without flood insurance unless you don’t have a mortgage. Every mortgage company I have had insists on coverage. They will buy it if you don’t.

        1. I should add, they will buy it and send you the bill.

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