As Alex Looms, Texans Wait for Decision on Flood Insurance

With Tropical Storm Alex skirting the east coast of Mexico and heading north, if residents along the Texas Gulf Coast are thinking it’s a good time to purchase flood insurance from the National Flood Insurance Program (NFIP) they are out of luck. New policies from the NFIP have not been available for purchase since June 1, after Congress declined to reauthorize funding for the program.

It was the fourth time in 12 months that lawmakers allowed the NFIP to expire. The U.S. House of Representatives recently approved legislation to extend NFIP authorization through Sept. 30, but the Senate has yet to act.

Computer models keep slowly pushing Tropical Storm Alex toward Texas as it moves into the Gulf of Mexico. The National Weather Service expects Alex to increase in strength and become a hurricane by Tuesday with possible landfall as early as Thursday.

The Texas Windstorm Insurance Association will halt its sale of windstorm policies along the Texas coast when and if Alex becomes a hurricane.

Texans have 688,000 flood insurance policies in effect. Many of these policies are up for renewal while others are seeking new policies in anticipation of the hurricane season. The storm surge from Hurricane Ike resulted in 44,000 flood insurance claims.

The Lower Rio Grande Valley was struck by Hurricane Dolly just two years ago resulting in $500 million in insured losses. Hurricane Dolly caused most of its damage to South Padre Island before coming ashore causing additional wind and flood damage on July 23, 2008.

Insurance agents have been telling homeowners to pay their premiums and their policy will remain in force. It’s a much different story on purchasing new policies especially on home closings.

Scott Daughtery, assistant general counsel with the Texas Bankers Association, said the state’s lenders have been following FEMA policies and procedures that have allowed home closings to continue unimpeded.

“I’ve not heard of any banks that stopped home loans because of the lack of funding for the flood insurance program,” he said.

However, Mark Lujan, a regional manager for the NFIP, says around the country lenders have been seeking out surplus lines companies to provide flood insurance to secure home loans. “While these companies are not federally backed, they are providing a flood insurance policy which is needed in some cases to close a loan.”

The costs to consumers have jumped dramatically. The NFIP offers flood insurance policies for approximately $400, while excess carrier’s premiums would be much more costly.

Wally Goodman, an agent with the Borden Insurance Agency in Corpus Christi, said agents have a nine-page FEMA document that directs agents on how to deal with the current dilemma. Goodman said a lot of confusion surrounds the 30-day waiting period on when the flood insurance policy begins.

“With no legislation in place, we don’t know if there will be a retroactive provision that triggers this 30-day waiting period. It could be 30 days from when the funding begins,” Goodman said.

Congress is considering legislation that would pump $19 billion back into the NFIP. The current legislation would keep $250,000 in place for residential coverage and $100,000 for contents and $500,000 for commercial structures and $500,000 for contents.

The Insurance Council of Texas recommends that all Texans, especially those along the Texas coastline, consider purchasing flood insurance.

“Hurricane Ike was a startling reminder of how homes, supposedly built high enough to withstand a flood or storm surge, were swept away,” said Mark Hanna, a spokesman for the Insurance Council of Texas. “A third of all homes that are flooded each year are located outside flood plains.”

Source: Insurance Council of Texas