The historic flooding in Yellowstone is an insurance nightmare

In the counties most devastated by the historic flood this week in and around Yellowstone National Park, only 3% of residents have federal flood insurance, effectively guaranteeing huge losses and long waits for money for repairs.

Why it matters: Most Americans don’t buy flood insurance, even when climate change makes epic disasters like the Yellowstone disaster more likely.

  • Such insurance may become more difficult to obtain: the Biden administration wants to drastically reduce the National Flood Insurance Program by excluding new homes in flood-prone areas.

Driving the news: Unprecedented rainfall, melting snow and landslides that have forced Yellowstone to close have also caused extensive destruction of homes and bridges in at least three Montana counties, where residents are awaiting a federal disaster declaration that will trigger help from the Federal Emergency Management Agency. (FEMA).

  • A “very low” number of homeowners in the area have flood insurance, Troy Downing, Montana’s insurance commissioner, told Axios on Thursday as he traveled to Red Lodge to monitor the damage.
  • “People are getting a little complacent about their policies,” Downing said. “They will say, ‘You know, I haven’t had a problem in years. Why am I still paying for it?

Homeowners’ insurance is usually not covered flood damage, notes FEMA, which manages the National Flood Insurance Program. “Just one inch of flood water can cause up to $ 25,000 in damage,” the agency said.

  • Without flood insurance, property owners seeking repair money must resort to a FEMA grant (which is usually small and difficult to obtain) or a disaster loan from the Small Business Administration (which must be repaid).
  • “Everyone will have to turn to FEMA for help, and they will be shocked to see how little help they actually receive,” Loretta Worters, vice president of the Institute for Insurance Information (III), told Axios.

By numbers: Only 2% of Montana residents have federal flood insurance, according to III, compared to 27% of Americans in general who say they have it (although FEMA estimates that the number is actually lower).

  • The worst of this week the damage is in three counties – Park, Carbon and Stillwater – where the federal absorption of flood insurance is 3% in 2020, data for the last year are available, according to Resilience Accelerator of III.
    • The area includes the luxurious Paradise Valley, where the Yellowstone River is dotted with millions of dollars’ homes, some of which are owned by celebrities who love fly fishing.

This is not just a problem in Montana. About 40 million properties in the United States are at risk of flooding, but only 5 million Americans have federal flood insurance, said Donald Griffin, vice president of the American Property Insurance Association.

What are they saying: “We are in a 100% crisis mode,” said Pat Ruzic, an executive coach who lives in a “100-year-old multi-character house” in Red Lodge, Montana. Her basement was completely filled with water on Sunday, and her first floor was a few inches.

  • Ruzic has no flood insurance and says he knows only one person who has it.
  • “When I bought the place and talked to people – no one has ever had such a problem,” she said. So, I did my homework and the answer was no to insurance.
  • “We are in a 100-year-old floodplain,” she said. “They say it’s a 500-year event. Who would have thought?”

What next: Congress must re-authorize the National Flood Insurance Program by the end of September, and there may be changes.

  • The Biden administration has quietly proposed a “massive review” of the program, according to E&E news.
  • The plan will reject new policies for all kinds of commercial buildings and new homes in flood-prone areas, and will cut off coverage for people who have already reaped many claims.
  • Congress will have a word or two to say about these proposals, Griffin said: “While floods are a bipartisan issue, oddly enough, there is still no consensus on how to reform or what to do about it.”

Bottom row: As climate change unfolds, places with a meager history of major floods will be vulnerable – and every homeowner should consider flood insurance.

  • “What FEMA has started to say is, ‘Where it rains, it can flood,'” Griffin said.
  • Downing, Montana’s insurance commissioner, called for everyone in the state to be covered: “We have no idea what July will bring.”

Note: Montana residents with questions about flood insurance can call (406) 444-2040 for information and assistance.

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