posted on 11 May 2016
-- this post authored by Scott Giberson
In the conversation about flood risk and the benefits of flood insurance, one of the most commonly used statistics is that about 25 percent of the claims paid by the National Flood Insurance Program (NFIP) are on policies covering properties outside of the Special Flood Hazard Area .
This statistic confirms that risk exists outside of the Special Flood Hazard Area because properties are experiencing flood damage covered under a flood insurance policy. It also points to the reality that a certain percentage of the public recognizes this risk since property owners and renters are purchasing the flood policies. The challenge is to assess the risk beyond the Special Flood Hazard Area in order to communicate this risk effectively and drive prudent decision-making by property owners, business owners, communities, insurers, lenders and policymakers.
Gilbert F. White, regarded as the "father of floodplain management," famously wrote in his 1942 doctoral dissertation at the University of Chicago that "Floods are acts of God, but flood losses are largely acts of man."  Likewise, floodplains are naturally occurring areas subject to inundation, while the Special Flood Hazard Area is a manmade delineation of an area within the floodplain used for insurance and floodplain management purposes with a 1 percent statistical likelihood of flooding to a certain level each year.
Approximately 5 percent of the nation is in the Special Flood Hazard Area.  Determining the level of flood risk of the 95 percent of properties outside of the Special Flood Hazard Area requires risk assessment tools, such as the CoreLogic Flood Model, Flood Risk Score and Flash Flood Risk Score. Following Superstorm Sandy, CoreLogic scientists and data analysts studied the flooded areas in relation to the Special Flood Hazard Area and compared this data with the CoreLogic Flood Risk Score. Interestingly, as illustrated in Figure 1, about 18 percent of the properties that experienced flooding from Superstorm Sandy were identified through the Flood Risk Score as being at "High" flood risk even though outside of the Special Flood Hazard Area .
While it may be obvious that flood risk exists beyond the delineations of the Special Flood Hazard Area, it may be less obvious and more complicated to determine the reasons that certain property owners or renters purchase flood insurance protection outside of this area. A combination of factors, including risk tolerance, knowledge, life experience, financial means and support network, certainly play a role in the decision to voluntarily purchase flood insurance. The hope of policymakers, risk analysts, insurers and other interested parties is that greater understanding of flood risk beyond the Special Flood Hazard Area will influence decisions about protecting property with flood insurance.
Last month a small town in east Texas along the Sabine River experienced historic flooding due to more than 20 inches of rain falling along the Texas-Louisiana border, swelling tributaries that feed into the Sabine River. This led to gage heights of 15' above flood stage and river discharge over 20 times the median volume at certain points along the river.  Figure 2 shows the precipitation analysis for the south Texas-Louisiana river basin from the National Oceanic and Atmospheric Administration (NOAA). CoreLogic analyzed the FEMA flood map, published in the 1990s, in conjunction with the Flood Risk Score and found that about 90 percent of the town's downtown area ranks from High to Extreme on the Flood Risk Score, while only 25 percent of the area is in the Special Flood Hazard Area. At the time of the flood, likely only around 1 percent of the properties were covered by flood insurance.
These are complex issues. More funding for FEMA's flood mapping may have resulted in more current flood maps which may have reflected a higher base flood elevation and expanded Special Flood Hazard Area. More communication and information about flood risk beyond the Special Flood Hazard Area may have resulted in higher numbers of insured properties. More local information about risk from the Sabine River could have led to different decisions. If the trend continues, at the end of the year the NFIP may report that about 25 percent of its claims paid were on policies written on properties outside of the Special Flood Hazard Area. But if we can assess and communicate the flood risk within these areas, the hope is that there will be a smaller and smaller percentage of properties both inside and outside of the Special Flood Hazard Area that are not covered by flood insurance.
1 "Special Flood Hazard Area" is an area identified by the Federal Emergency Management Agency (FEMA) as being subject to a high risk of flooding, at least 1 percent annual chance, and which is shown on FEMA's flood maps as a zone beginning with the letters "A" or "V." Per federal law, federally regulated lending institutions must require the purchase of flood insurance on loans secured by buildings in the Special Flood Hazard Area.
2 Gilbert F. White, "Human Adjustment to Floods," University of Chicago, 1942.
3 Several studies have estimated the percentage of properties in the Special Flood Hazard Area from 4 percent to 7 percent.
4 CoreLogic Flood Risk Score rates the risk associated with flood at a property according to a number scale (0-100) and a severity category (Very Low, Low, Moderate, High, Very High and Extreme).
5 National Oceanic and Atmospheric Administration, National Weather Service.
6 While NFIP statistics for this town are not available, the town is in a county for which there were less than 150 NFIP flood insurance policies in force at the time. The county has a population near 15,000 and over 8,000 addressed properties according to the CoreLogic property record database. Thus, only slightly more than 1 percent of the properties in this county are insured against flood even though the Sabine River forms its eastern border.
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