The 'Savings-and-Loan of the Seas' Flood Insurance Puts Taxpayers in Hurricane's Eye

August 30, 1992|By BETH MILLEMANN

Washington -- For the past week, the nation watched in horror as Florida counties and Louisiana parishes fell before the onslaught of Hurricane Andrew. Already called the worst natural disaster in U.S. history, Andrew's statistics shock by their size:

* Some 250,000 Floridians have lost their homes.

* The price tag for property damages in Florida is at least $15 billion.

* More than 1 1/2 million people fled New Orleans in a 48-hour period.

* Southern Louisiana was hit with 10 inches of rain in a day.

* Louisiana residents fleeing the southern part of their state caused a 3 1/2 -mile traffic jam on Highway 90.

The most shocking statistic of all, of course, is the loss of human lives to the storm: more than a doz- p en fatalities already identified with hundreds more injured.

In the next few weeks, the affected communities will clean up and try to take stock of their losses, watched in sympathy by the rest of the nation. But most Americans do not realize that the swath cut by the storm goes beyond the Gulf of Mexico and into the pockets of every taxpayer in the country. And they certainly do not realize that the enormous financial disaster wrought by Andrew would not have been possible without their tax dollars.

More than 50 federal programs fund coastal development and redevelopment, including money for highway and bridge building, beach renourishment and a host of other programs spanning nearly every federal agency. The Department of Interior concluded in 1987 that this stream of tax dollars is one of two major factors that helped make possible the explosion of seafront development during the past 40 years.

One of the grand-daddy federal subsidies is the National Flood Insurance Program. With $220 billion worth of policies, it is one of the largest domestic liabilities after the Social Security system. But because of its financial instability, the Flood Insurance Program may shortly become the ''savings-and-loan of the seas'' and the next federal program to be bailed out by the taxpayer.

Created in 1968, the program was intended to discourage unwise development by requiring flood-prone communities to plan new development away from the water's edge -- in return for flood insurance from the federal government. Private companies largely refused to insure what they viewed as overly risky development.

Instead, the bulk of the Program's 2.5 million policies now line the sea: 72 percent insure development along the Atlantic, Pacific and Gulf of Mexico, and another 10 percent insure development along the Great Lakes. But the states mostly recently in the news hold the lion's share of the policies. There are over 960,000 federal flood-insurance policies in Florida, nearly 257,000 in Louisiana and about 220,000 in Texas. All together, these three gulf states make up over half of the program's total policies. (In Maryland, nearly 34,000 policies are worth more than $2.8 billion.)

Florida, Louisiana and Texas are the most hurricane-prone states in America. One in three U.S. hurricanes strikes Florida, while among the most deadly hurricanes -- the Class 4 Andrews or Class 5 Camilles of 1969 -- two out of three roll over Florida or Texas, according to the National Hurricane Center.

As we saw this week, these savage storms carry a heavy financial price tag. The human toll may also be high; more than 17,000 Americans have been killed by hurricanes in the past hundred years -- 6,000 in the Great Galveston Hurricane of 1900. By comparison, the great San Francisco Earthquake of 1906 cost more than 600 deaths.

The National Hurricane Center has long warned that the nation stands on the brink of a deadly disaster. In the mid-1980s it reported that:

''In virtually every coastal city of any size from Texas to Maine . . . the United States is building toward a hurricane disaster. . . . The areas of the United States where 9 out of 10 [drowning deaths occur] from the storm surge during hurricanes are the very areas where the most dramatic increases in population have occurred in recent years.''

The center's bleak forecast was updated at a conference this April when national experts predicted that the nation was beginning a new 25-year cycle of more frequent and ferocious hurricanes. If the center's analysis is correct -- and there is no reason to assume otherwise -- Andrew could be the warning shot in a long volley of hurricanes shooting toward America's coasts.

The federal taxpayer helps make possible the development that is a sitting duck for hurricanes, beach erosion and sea-level rise. The National Flood Insurance Program is a key member of the taxpayer-funded subsidies family. As the U.S. General Accounting Office acknowledged 10 years ago, federal flood insurance provides a ''financial safety net'' for shoreline development.

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