Flood Insurance in Texas and Oklahoma

The floods that have been affecting large parts of Texas and Oklahoma are bringing several questions to the forefront about the National Flood Insurance Program and participation in those states. This information also illustrates some of the challenges the program faces, such as a ballooning deficit ($23 billion) and the need to phase-in risk based prices while phasing-out costly subsidies.

NRDC has become an active and vocal participant in the debate on flood insurance. The risk of flooding is increasing as a result of sea level rise, changing precipitation patterns, and other climate change related impacts. The National Flood Insurance Program should be one of our best tools for preparing for adapting to climate change, but instead it's a huge liability.

Recently, NRDC proposed novel reforms to the NFIP that would make it easier for people to move away from areas at greatest risk of flooding. The reforms we recommend could transform the NFIP from a program that prolongs flood risk in Texas, Oklahoma and elsewhere, and is a serious fiscal liability, into one of the best tools the nation has to prepare for the impacts of climate change, while also decreasing our current and future vulnerability to floods.

But until major reforms are made, we're left with the situation as it now stands. Hopefully, floods like these can provide insights into changes we need to make to better cope with the rising risks of floods.

How many people in Texas and Oklahoma have flood insurance coverage and how much does it cost them?

In Texas 597,951 properties (11.4% of the national total) are covered and in Oklahoma only 16,291 (0.3% of the national total) are covered. On average, property owners in Texas pay about $627 a year and in Oklahoma they pay $757 a year to maintain coverage that allows them to rebuild in the wake of a flood. That's a pretty reasonable cost, especially when you see the damage that's being caused this week.

Unfortunately, a lot of people don't bother to purchase flood insurance. In a story on flood insurance that appeared in the International Business Times, a spokesperson for the Insurance Council of Texas stated, "I think less than half of the homeowners affected [by recent floods] had flood insurance."

There are a lot of reasons for lack of coverage. Some people don't realize they live in a floodplain. Others mistakenly believe their homeowners policy will cover flood damages. Even among property owners who have federally backed mortgages and are legally required to maintain coverage, many don't. FEMA and the banks who hold the loans don't rigorously enforce this requirement. Lack of coverage means people don't have the assistance they may need and it means fewer people are paying into the system, leaving fewer people paying premiums to cover the claims.

How much in flood damages has federal flood insurance paid out?

Since the inception of the National Flood Insurance Program, Texans have been received $5.6 billion and Oklahomans just under $162 million in damage claims. Texas property owners have received more flood insurance payments from the federal government than any other state, except Louisiana ($16.7 billion) and New Jersey ($5.65 billion).

This disparity between payments made in Texas and Oklahoma illustrates the difference in flood risk between the two states, not to mention the relative size of their populations. But it's also largely driven by the amount of hurricane damage Texas receives along its vulnerable coastline. As you can see in the table below Harris County, TX (where Houston is) leads the state in flood insurance losses, topping $2.2 billion in claims, more flood insurance claims than many states have received.

It should be noted that the information below is historical and does not include any claims or payments from the recent flooding events in Texas and Oklahoma.

A subset of properties in the table above are called "repetitive loss properties". As the name implies, these have been damaged by floods repeatedly and had multiple claims paid by the National Flood Insurance Program over the years. According to documents requested by NRDC from FEMA, more than $1 billion of the damages paid out in Texas (18 percent of total in Texas) went to 6,683 "repetitive loss properties". One notable property in South Houston has made 27 separate flood damage claims totaling $1.8 million!

There's been a lot of debate about how taxpayers subsidize flood insurance, making it cheaper for people in flood prone areas to pay for coverage. How many subsidized policies are in the counties affected by the recent floods?

About 20% of the 5.5 million policies in effect across the nation pay subsidized rates. In other words, those policy holders do not pay the true risk based price for insurance. Because of recent reforms in Congress, many who have subsidized insurance will slowly be transitioned to risk-based prices.

In the areas affected by the Memorial Day floods, over 3,000 policies in Texas and Oklahoma were subsidized as of 7/31/2013. That constituted about 1% of all policy holders in the affected counties in Texas and 3% in Oklahoma, well below the national average.