Flood Insurance Losses from Harvey Could Match Katrina’s, I.I.I. Says

Flood damage in Texas from Hurricane Harvey may equal that from 2005’s Hurricane Katrina, the costliest natural disaster in U.S. history, according to an insurance research group.

As heavy rain pounded Houston and Texas’s coastal counties on Aug. 27, the Insurance Information Institute (I.I.I.) said it was still too soon to make precise estimates of the damage to homes and businesses.

“It could be a flood loss like Katrina because of the amount of water that’s coming in … not as much wind as it will be water,” said institute spokeswoman Loretta Worters.

Hurricane Katrina resulted in more than $15 billion in flood insurance losses in Louisiana and Mississippi that were paid by the National Flood Insurance Program (NFIP), a federal program that is the only source of flood insurance for most Americans.

The NFIP is already deeply in debt and likely will have to be bailed out again by U.S. taxpayers, as it was after Katrina, to cover the bill for flood damage claims from Harvey. The program is set to expire on Sept. 30 unless Congress acts to extend it.

Having dumped more than two feet of water on Houston already, Harvey, which hit the Texas coast as a Category 4 hurricane but was downgraded to a tropical storm, was expected to hover over Southeast Texas for several days and drop more than two more feet of water.

The NFIP, managed by the U.S. Federal Emergency Management Agency, sells policies by dozens of private insurers, with premiums going to FEMA.

A national poll by the Insurance Information Institute in 2016 showed only 12 percent of people in flood-prone coastal areas had flood insurance, down from 14 percent in 2015.

The NFIP was created in 1968 after private insurers stopped selling flood coverage. Critics have said the program provides a misguided tax subsidy to coastal and river valley property owners, encouraging development in flood-prone, often environmentally sensitive areas such as wetlands.

The NFIP owes $24.6 billion to the U.S. Treasury, most of it from claims from Hurricane Katrina in 2005, Superstorm Sandy in 2012 and floods in 2016, according to FEMA. Many lawmakers are skeptical that debt will ever be repaid.