Texas Torrents—and Insurance’s Perfect Storm

Hurricane Harvey dropped nearly 52 inches of rain on southeastern Texas and beyond. Standard home and business insurance policies exclude flood damage as a named peril. Few people are covered by separate flood insurance policies. And key parts of the National Flood Insurance Program are set to expire on September 30, unless....  

On August 30, Tropical Storm Harvey blasted through the single-storm total rainfall of any storm ever recorded in the continental United States: 51.88 inches over Cedar Bayou. All equivalents to the 24.5 trillion gallons dumped onto Texas and Louisiana are staggering. That volume exceeds Houston’s average annual rainfall in less than a week. It approximates 15 percent of the volume of Lake Erie. That’s a year’s flow over Niagara Falls. It's enough to cover the entire state of Arizona a foot deep.

Thousands of square miles were flooded by Hurricane Harvey. More than 80 percent of these homes are not protected by flood insurance. Credit: The Washington Post

The nation’s attention is riveted on Houston as the fourth largest city in the nation and the center of the country’s petroleum industry. But as history reminds us: Harvey is flooding areas far beyond Houston. It is also devastating the lives of people in surrounding areas of Texas with three and four feet of water: in a fateful echo of the 1913 flood, Dayton, TX was deluged with an unfathomable 49.23 inches. Louisiana and neighboring states were also hard hit—including locations impacted by Hurricanes Katrina and Rita almost exactly 12 years ago (see “How Does Hurricane Harvey Compare with Katrina?” and “Katrina + 10: Once and Future Disasters”).

Harvey dumped more than four feet of rain on Dayton (!),
Texas; see video on YouTube

Hearts and prayers go out to the hundreds of thousands of people displaced from homes and workplaces with nowhere to go as the water itself has nowhere to go. Already talking heads are estimating recovery will take years—as indeed it did after Katrina. 

However, if shivering flood sufferers are consoling themselves by clinging to a warm hope that their homeowner’s or business insurance will make them whole, the chilling reality is: some things have not changed since 1913. They may be dead in the water. 

Scary facts to contemplate:

Home and business insurance policies do not cover flooding 

Indeed, typical policies almost always have a specific exclusion not only for flooding but for any type of groundwater intrusion—including from such ordinary causes as backed-up sewer mains or snow melt from high drifts piled against foundations. Obtaining protection against any source of groundwater requires a separate flood insurance policy. 

One reason private insurers eschew covering flooding on their own is that, unlike such disasters as fire that often affect only one or a few houses in a residential area, flooding can devastate square miles at a go: as of August 31, Harvey has inundated nearly 29,000 square miles with at least 20 inches of rain, and many times more area at lesser but still monumental volumes of water. Thus, major floods represent a terrific risk to an insurer. 

Harvey inundated tens of thousands of square miles to
unprecedented depths. Credit: The Washington Post 

Recognizing that, in 1968 the U.S. government instituted the National Flood Insurance Program (NFIP), now managed by the Federal Emergency Management Agency (FEMA). The NFIP makes federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances to reduce the community’s (and thereby also the nation’s) overall risk of future flood damage. NFIP coverage is up to $250,000 for the structure and $100,000 for the contents of a home.

To ascertain flood risk in various locales and to price premiums, the NFIP conducts surveys and studies along coastlines, waterways, and other places to identify areas prone to floods or flood-related hazards (such as storm surges, tidal waves, mudslides, flood-induced erosion, etc.). Such flood risk zones are plotted on Flood Insurance Rate Maps (FIRMs). These maps focus on identifying Special Flood Hazard Areas (SFHA): areas having a 1% or higher chance of flooding in any given year, also stated as being at risk of flooding during a “1-in-100-year flood.” 

Harvey has been rated as a once-in-a-
millennium event. Credit:
The Washington Post

The only homeowners required to obtain a flood insurance policy are those who choose to live in a SFHA—that is, within the area of a hundred-year flood. For better or worse, flood insurance for everyone else is optional (and most agents don’t even discuss it with clients unless asked, and might pooh-pooh it if asked). 

Because flood insurance is not universally required like other homeowner and auto insurance, people underappreciate their true risk—indeed, perhaps are lulled into a false sense of security that they have no risk.

Woe to them, because…

…flood risks are greater than most think

Many people did not take probability theory in high school math (or don’t remember it if they did). So here’s an eye-opening refresher news flash: a 1-in-100-year flood is virtually guaranteed to occur far more often than once a century. Indeed, the way the mathematics of probabilities works out, during the course of a 30-year mortgage of a property in a SFHA, there is a 26% chance the home will be flooded. That’s better than one chance in four, folks. Them’s betting odds. 

A similar situation also holds true for supposedly lower-risk regions, such as those designated as 0.2% zones (a 1-in-500 flood). And nothing about the odds indicates when. Indeed, two 100-year or 500-year events could—and have—happened in back-to-back years: Harvey itself is Houston’s third 500-year (or greater) flood in three years after its two Memorial Day floods in 2016 and 2015.

Two dozen so-called 500-year floods have befallen various
places in the United States since 2010.
Credit: The Washington Post

 

The rainfall intensity of Harvey is now rated as a 1-in-1,000-yearflood event for Houston—that is, a flood of such great magnitude as having just a 0.1 percent chance of happening in Houston in any year. 

 

Upshot: either because of ignorance of the actual risk or of the necessity for a separate policy or because the insurance is optional, only a meager 12 percent of U.S. homeowners nationwide carry flood insurance. The percentage is a bit higher in the south (especially in Florida), but even in flood-prone Houston more than 80% of homeowners have not seen fit to take out flood insurance. 

That means that for four out of five Houstonians, their Harvey-ravaged homes are likely a dead economic loss. If they choose to rebuild, it could mean bye-bye to retirement savings…

(FWIW, tornadoes, high winds, and hail may be covered by standard homeowner policies, depending on the policy and the insurer, but earthquake damage is also often excluded; the only way to know for sure is to check your policy. It is also important to ensure that the limits to your coverage are high enough to realistically cover the cost of repair or replacement.)  

Key parts of the National Flood Insurance Program are due to expire

Unless reauthorized or extended by Congress, come September 30 (2017), the NFIP can no longer write any new flood insurance policies; moreover, 

existing policies would continue only until the end of their one-year terms, and then terminate. The authorization of appropriations to continue mapping flood hazards also would expire, including any programs to update older flood maps to take into account the effects of development or climate change. And the authority for the NFIP to borrow funds from the Treasury—to, among other things, make good on claims submitted from Tropical Storm Harvey—would be reduced from $30.425 billion to $1 billion. For details, see the July 25, 2017 Congressional Research Service report R44593 Introduction to the National Flood Insurance Program (NFIP).

Top 10 flood insurance payouts.
Credit: Insurance Information Institute

But that’s not all. Long-term, many experts are convinced that the current structure of the NFIP needs thoughtful comprehensive reform (for example, see U.S. Government Accountability Office, report GAO-17-425, Flood Insurance: Comprehensive Reform Could Improve Solvency and Enhance Resilience, April 2017). In part because of the huge multi-billion-dollar hits of Hurricanes Katrina and Rita in 2005 and of superstorm Sandy in 2012, which dwarfed more “average” losses in other years, the NFIP is now in significant debt for the payout of claims and other expenses, because premiums are insufficient to cover losses. As of March (2017), the NFIP owed the U.S. Treasury $24.6 billion. 

Existing premiums do not reflect the full risk of actual losses to floods, especially in the context of rising sea levels and trends toward increasing intense rain events—a shortfall that increases the federal exposure to risk. At the same time, affordability of premiums has been a political hot potato, especially from people who want or need to stay in an SFHA for whatever reason: because it’s all they can afford, or because they enjoy a great view, or because the property has been in the family’s hands for generations, or simply because they do not grasp the magnitude of their actual physical risk. 

Sea level rises, coastal cities sink, rainfalls intensify

Houston, the Gulf Coast, and much of the entire east coast is facing a triple whammy as the result of measured and predicted climate change.

First, global sea level is rising—and quickly: 3.4 mm per year. A few silly millimeters may not sound like much, but that rate amounts to 1.3 inches per decade worldwide. There are two causes, both stemming from the warming of the planet: first, the oceans (which are absorbing 90 percent of the warming) expand as the result of absorbing thermal energy (thermal expansion is how non-digital mercury or liquid fever thermometers work); second, the volume of water in the oceans is increasing as Arctic and Antarctic ice sheets melt.

Just since 1993, in less than 25 years, sea level around the entire planet has risen 3.4 inches, Credit: NASA

Second, there’s an increased likelihood of more powerful hurricanes with higher wind speeds. Moreover, as warmer air can hold more moisture, even milder tropical storms are likely to bring increasingly intense rainfalls.

Third—and less appreciated, but in some places more significant—the land on which many coastal cities are built is subsiding (sinking) as the result of the pumping of fossil fuels and groundwater from underground reservoirs. When the fluids are removed, the overlying ground layers sink lower, exacerbating the effects of flooding from higher sea levels. Nowhere is that as pronounced as in the cities of, wait for it, Houston and Galveston. 

A Hurricane Harvey is not necessary for a disaster

Even before Harvey, insurers have been growing increasingly concerned about this juggernaut “perfect storm” confluence of events. In April (2017), the American Academy of Actuaries concluded: “There is an increasing awareness among various constituencies (regulators, legislators, consumers, insurers, real estate agents) that too many uninsured homes are subject to devastating losses from flood events, and the NFIP alone cannot solve the problem. This is true today, and will be even more true if changing conditions result in rising sea levels and/or more extreme rainfall events in the future.” (The National Flood Insurance Program: Challenges and Solutions, April 2017, p. 77)

Far less rain than Harvey dropped on Houston can cause record flooding in colder northern regions of the nation. A century of weather data indicate that intense rainfall events over the Ohio Valley and Midwest are increasing both in frequency and intensity. Because the Easter 1913 storm system brought the flood of record to Indiana and Ohio, data from it set a benchmark for the question “how bad could ‘extreme’ become?” (see “Benchmarking ‘Extreme’”) Credit: NOAA; Trudy E. Bell

It is time for clear-sighted recognition of the reality of the stark words of FEMA itself, “Everyone lives in a flood zone.” 

Floods can happen in unexpected places—even places where rainfall is not intense, or even is completely absent. In the U.S. Southwest, for example, flash floods from cloudbursts in distant mountains can rush through downstream desert areas that haven’t seen a drop of rain (that’s why campers should never set up a tent in an arroyo or dry stream bed even if the banks look like an attractive shelter from wind). Flash floods in downstream dryer areas can also happen with springtime melting and bursting of upstream ice dams. In urban areas, the construction of impermeable surfaces such as parking lots and pavements increase the speed of runoff and impede the absorption of rains into soils—and the hardening of riverbeds or coastlines with riprap (concrete blocks) can redirect flooding onto neighboring lands. 

And as anyone who has endured a household flood can attest, even a little bit of water can wreak thousands of dollars in property damage: just imagine what flooring, furniture, and electronics would need to be repaired or replaced in your own home if your living room and bedrooms were ankle deep in muddy floodwater contaminated with sewage and chemical toxins. Moreover, water has so much mass that even two feet of rushing water can sweep away a car (as well as ruin the engine and interior).

Square miles of flooding in Dayton, Ohio, from the 1913 flood. Then, as now, homeowner insurance did not cover flooding, so the flood victims on the hilltop in the foreground were likely watching the drowning of their life's savings. Credit: Dayton Metro Library

Upshot: most of us are at greater risk of financial loss from flooding than we recognize. Even though no one anticipates having a house fire or getting into an auto accident or needing surgery, most adults recognize that the risk of such events is not zero, and that any such event could be financially catastrophic (assuming we lived); so we routinely carry homeowner, auto, and medical insurance to protect ourselves against financial ruin. Even if we never make a claim, we rest easier at night with peace of mind—and if disaster falls, we are thankful that our loss is limited to just a deductible. 

Yet somehow we don’t recognize our same non-zero physical and financial risk to flooding—even if we live near coastlines or other water, as much of the nation does. Strong economic and risk-reduction arguments could be made in favor of encouraging all homeowners, renters, and business owners to mitigate their risk to floods as they already do against other risks—both to protect themselves and to ensure the viability of national flood insurance while keeping premiums low. 

©2017 Trudy E. Bell

Next time: Desperate Medicine

Selected bibliography

Bell, Trudy E., The Great Dayton Flood of 1913, Arcadia Publishing, 2008. Picture book of nearly 200 images of the flood in Dayton, rescue efforts, recovery, and the construction of the Miami Conservancy District dry dams for flood control, including several pictures of Cox. (Author’s shameless marketing plug: Copies are available directly from me for the cover price of $21.99 plus $4.00 shipping, complete with inscription of your choice; for details, e-mail me), or order from the publisher.

Katrina + 10: Once and Future Disasters

Ten years ago this month, Hurricane Katrina—third most intense hurricane to make landfall in the U.S., based on central pressure—slammed into the U.S. Gulf Coast, beginning the nation’s worst and most widespread disaster since the Great Easter 1913 flood. Ten harsh lessons from both 

“You need to pay attention to what is happening with Hurricane Katrina,” advised the late Air Force senior historian Craig B. Waff (1946–2012), who called me from Wright-Patterson AFB in Dayton, Ohio, just a few days after Katrina began battering the Gulf

Flooded houses in New Orleans after Hurricane Katrina in 2005 (left) and in Dayton during the Great Easter 1913 flood. Credit: Jocelyn Augustino/FEMA and Dayton Metro Library

Coast on August 29, 2005. “Many aspects seem to be repeats of what you’ve been discovering about the 1913 flood.” 

“But the 1913 flood wasn’t a hurricane; it was a winter storm system,” I objected, at that time still rather narrowly focused after having then researched the Great Easter 1913 national calamity for just over two years and published just my first article on it.

“Doesn’t matter,” he replied. “The societal parallels are uncannily striking.” 

How prophetic he proved to be. 

1 – Both 2005 and 1913 were really, really bad. The protracted disaster that began with Hurricane Katrina on August 29, 2005 ultimately killed over 1,800 people and devastated more than 90,000 square miles in at least half a dozen states (Louisiana,

Rainfall during Hurricane Katrina in 2005 (left) and during the Great Easter Flood of 1913 (right). Also shown are the devastating Easter 1913 tornadoes and multistate dust storm. Credit: NOAA and Trudy E. Bell

Mississippi, Tennessee, Florida, Georgia, and Alabama)—about the area of Great Britain. The Federal government spent more than $110 billion in disaster relief, recovery, and rebuilding while private insurers and reinsurers covered nearly another

Costliest hurricanes. Credit: AccuWeather

$62 billion in insured catastrophe losses—the highest annual U.S. insured catastrophe loss ever. In comparison, the Great Easter 1913 disaster claimed some 1,000 lives, afflicted a similar area over parts of 15 states, costing the equivalent of at least $116 to $130 billion (in 2013 dollars) of documented damage. In both cases, we’ll never know precisely just how bad, as many flood losses were uninsured (and thus uncounted) and many people may have died months later and not been counted as part of the original figures.

2 – 2005 wasn’t just Katrina. “Don’t Call it Katrina” is the title of a May 29, 2015 New Yorker article by Thomas Beller. Katrina was just the first knockout punch of a series

Hurricane Rita: Credit: NOAA

of devastating hurricanes, followed three and a half weeks later by powerful Hurricane Rita, hitting land over Louisiana and Texas on September 24, but already fading into forgetfulness. Katrina and Rita marked the first time that two hurricanes of Category 5 strength on the Saffir-Simpson scale formed in the Gulf of Mexico in a single season. Really forgotten was the proverbial last straw: Hurricane Wilma—the most intense Atlantic hurricane on record—which nicked the tip of Florida on October 24, doing another $29 billion in damage, but concentrated most of its fury over the Yucatan. Not only did these hurricanes bring storm surges and torrential rain, but they were also accompanied by tornadoes—59 for Katrina and no fewer than 89 for Rita, putting both

Hurricane Wilma. Credit: AccuWeather

hurricanes in the top 10 for number of tornadoes. And of course, the Great Easter 1913 storm system consisted not only of phenomenal flooding in the Midwest—still holding scores of records across Ohio and Indiana; moreover, it was ushered in with a hurricane-force windstorm (would have ranked as Category 2) that crucially crippled communications, and was accompanied by more than a dozen tornadoes, including record-setters in Omaha (still Nebraska’s deadliest twister) and Terre Haute. 

3 – 2005 wasn’t just New Orleans. New Orleans was simply the largest city devastated by Katrina, and the one toward which the media converged, possibly because in all the devastation it was comparatively easy to reach, had the greatest concentration of storm survivors and public officials, and had at least some functioning facilities. New Orleans became the public face of Katrina. But that focus on just
Katrina and just New Orleans not only eclipsed the plight of millions of other Louisianans, but also unjustly obscured the tragedy of Mississippi as well as all the victims of Hurricane Rita, especially those in Texas. This, of course, echoed what happened in 1913, where Dayton became the focus of public attention as the result of its being the first major city to get word of the disaster unfolding in Ohio, Indiana, and elsewhere out to the world despite decimated communications—reinforced by the fact that Ohio’s governor was also the publisher of the Dayton Daily News and that Dayton’s savior John H. Patterson was the president of NCR, the city’s largest employer. Even today, the flood is still remembered around Ohio as “the great Dayton flood,” as if the monumental floodwaters stopped at the city limits. Ultimately, identifying a natural disaster with one city has the unfortunate effect of diminishing public perception of both the scope and importance of a monumental, widespread calamity.

4 – 2005 wasn’t just a “natural” disaster. Beller in his New Yorker article “Don’t Call It Katrina” plus many other sources make the point that inadequately maintained levees and other infrastructure compounded the magnitude of the 2005 disaster in New Orleans and elsewhere. Human hubris also played a key role in the devastation

Luxury condos built on flood plain just a few feet above the
average level of the Rocky River. Another danger is the
eroding cliff undercutting the houses above the condos.
 Credit: Trudy E. Bell

wreaked by the 1913 flood, notably houses and businesses built encroachingly close to rivers and widespread deforestation that accelerated runoff. Those contributing causes were identified immediately after both disasters—and likely will be the subject of an entire future installment to this research blog. The chilling part is, humans don’t learn. They still think it is perfectly okay to build on flood plain—see photo at right that I took of the luxury condos built in 2012 in Rocky River, Ohio. Or they feel that because the last major flood happened in 1913, another such flood is unlikely to happen again, so they are justified in trying to avoid mandatory flood insurance—as several residents have tried to do in Troy, New York. They would be well advised to read government reports that predict more frequent intense greater rainfall and runoff in the coming decades for the Midwest and Northeast (see top two references in “Benchmarking ‘Extreme’”).

5 – 2005 wasn’t the worst that could have happened. Hurricanes Katrina and Rita were “only” Category 3 hurricanes at landfall. They could have been Category 4 or 5. In 1913, the intense rain fell when the Ohio, Missouri, and Mississippi rivers were at normal height; they could have been in flood. As monumental as both calamities were, they were not the worst theoretically possible.

6 – The disaster wasn’t over when the waters receded and the media left. In 1913, some newspapers went out of their way to pretend that cities were back to normal as soon as the floodwaters receded—even to the point of spinning the disaster

Paducah, KY, scoffed that the record
1913 flood was a disaster even though
floodwaters filled most city streets up
to 8 feet deep. Paducah News-
Democrat, April 16, 1913, p. 4.

as a “water carnival” equivalent to having the city’s “face washed” and that yielded nothing worse than some lost wallpaper (see “Spurning Disaster Aid”). In 2005, as recounted by Beller and in a 2012 Huffington Post Live half-hour roundtable discussion on how soon we forget, the reality of living with unsafe water, inadequate food, temporary housing, filthy streets, devastated infrastructure, improvised medical care, while trying to rebuild despite having little or no flood insurance payments—all the time still needing to earn a living and care for children—imposed huge medical stress on Louisianans and Mississippians (listen around minute 16:00). One

astute advisor cautioned New Orleans residents, “As bad as you feel now, you will feel worse in a year” when the adrenaline is gone and the media are gone, yet residents will still be struggling with finding gasoline and food. The long slog to recovery resulted in an undercurrent of rage at slow bureaucracies and clueless public. Observed one Huffington Post Live commentator, “the disaster lasts longer than the news cycle.” 

7 – Plenty of post-disaster blame was dished out. Blaming everyone in sight after a monumental natural disaster is apparently a recognized psychological response. The Federal government was excoriated for many failings in handling emergency response
after the hurricanes in 2005, as well as the U.S. Army Corps of Engineers for the failed levees. That included blaming the very victims of the disasters—even to the point of implying or stating in 2005 that New Orleans “got what it deserved” because of its culture of partying and sinfulness (see Beller’s article) or stating the same thing in 2012 after Hurricane Sandy because the New Jersey coast had the Atlantic City gambling casinos (see the Huffington Post Live video around minute 17:30).  One sobering caution regarding reports calling for revamping government responses: any new procedures won’t get tested until the next Big One—and may themselves fall short both because they are yet untried, and the next disaster will likely differ importantly from the past. 

8 – Big natural disasters are more likely in future. The trend is clear. Many reports predict that weather will grow more violent as the planet warms, increasing both the

Flooding after Katrina made
the cover of this 9/2014
global reinsurance forum on
disaster risk resilience.

number and the intensity of future hurricanes (like 2005) as well as the magnitude of riverine floods in the interior of the eastern half of the nation (like 1913). Costs of major natural disasters are climbing because of increased population, increased personal wealth, and increased infrastructure now in harm's way, as well as some people's magical thinking in continuing to believe that no big disaster could really befall them. Insurers and reinsurers are taking projected climate trends very seriously, and cities and utilities are devising plans for “climate resilience.” 

9 – Unless restructured, the funding of flood insurance is headed for a train wreck. This topic is way too big to address in this one 10^th anniversary post, but is a major concern for both the U.S. Congress as well as for individual cities. The need is clear although all solutions appear unpalatable. But this elephant in the room is a clear case of “you can pay me now or pay me later.”

10 – We need to fight the natural human tendency of “post-storm amnesia” in the words of the Huffington Post video (around minute 24:00). Much of the forgetting of the scale, horror, and consequences of the 1913 calamity appears to have been quite deliberate—a topic I intend to explore in a future post to this research blog. Moreover, “motivated forgetting” after the trauma of natural disaster is a known psychological phenomenon. But such forgetting also impedes individual or societal learning from past experience and taking precautions for protection against a repetition. 

Historian Craig B. Waff in Air Force 2.

In short, historian Craig Waff  (R.I.P.) was absolutely spot-on in perceiving parallels between 1913 and 2005. The parallels demonstrate how quickly and thoroughly humans forget a phenomenal disaster through first dismantling its various aspects, and then mentally diminishing the magnitude and importance of those aspects until a monumental calamity can be and may be obliterated from memory…

©2015 Trudy E. Bell

Next time: Service Above Life

Bell, Trudy E., The Great Dayton Flood of 1913, Arcadia Publishing, 2008. Picture book of nearly 200 images of the flood in Dayton, rescue efforts, recovery, and the construction of the Miami Conservancy District dry dams for flood control, including several pictures of Cox. (Author’s shameless marketing plug: Copies are available directly from me for the cover price of $21.99 plus $4.00 shipping, complete with inscription of your choice; for details, e-mail me), or order from the publisher.