Thousands of homeowners and businesses that suffered flood damage during Hurricane Debby in early August may be on their own to recover. A new report from climate risk analysis company First Street found that 78% of properties flooded in Debby are outside flood zones A or V.
Borrowers with federally backed mortgages who own property in one of those high-risk zones — known as FEMA Special Flood Hazard Areas (SFHAs) — are required to buy flood insurance. But the federal government doesn’t require flood insurance for properties outside those zones. Homeowners and businesses in those areas might not have flood insurance if their private mortgage lenders don’t require it.
Debby’s damages are “staggering,” First Street’s report notes, estimating damages in areas outside high-risk flood zones will run around $9.7 billion.
How many properties lack flood insurance?
It’s difficult to pin down how many American homeowners actually have flood insurance. Estimates vary widely — from 4% to 27% — but most people lack coverage for such an event.
Forgoing flood insurance can leave homeowners in grave financial risk, even if they don’t live in a high-risk zone. Since 1996, 99% of U.S. counties have experienced flooding. And more than 25% of National Flood Insurance Program (NFIP) claims originate outside areas at high risk of flooding.
What’s next? Staggering uninsured losses
Homeowners insurance doesn’t cover damage from flooding. Property owners who need protection for flood risks must buy a flood insurance policy. Most Americans who have flood insurance buy it through the NFIP. But in recent years, more insurers have entered the private flood insurance marketplace.
Private market insurance losses from Debby will fall below $1.5 billion, and NFIP losses will be less than $300 million, according to estimates by Moody’s RMS Event Response.
Hurricane Debby caused $12.3 billion in damages, according to First Street — with $9.7 billion of that cost occurring outside FEMA SFHAs. The analysis company estimates roughly 124,000 flood-affected properties were “likely not subject to the mandatory flood insurance purchase requirement.”
“Under the assumption that most of these properties likely do not have flood insurance, the estimated preliminary uninsured damage of Hurricane Debby ranges between $7.6 billion to $12.6 billion,” the report states.
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