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Unintended Consequences — Flood Insurance

By Brent Rivenburgh, Allen & Stults Co., Inc.

H istory helps us understand why things are what they are. This article will provide some history of the National Flood Insurance Program, the current status of flood insurance for associations and owners and some tips of what you can do to protect your property while minimizing costs. Although the Federal Government did not get into flood insurance until 1970, it had been involved in flood man- agement and designating flood hazards as early as 1824. Over the next two centuries some of its actions resulted in an

when coastal and tidal studies began. But very little was done about floodplain management. While various flood insurance programs were proposed in the 1950s nothing was passed until 1968. In 1966, The Task Force on Federal Flood Control Policy issued a report. Ironically, in their recommendations they stated, “if misapplied an insurance program could aggra- vate rather than ameliorate the flood program.” Thus, the Unintended Consequences.” Also, in 1966, New Jersey authorized a state agency to mark flood hazard areas and recommend the proper use of these flood prone areas. In 1968 the Federal Government passed the National Flood Insurance Act which created the National Flood Insurance Program (NFIP), which would provide flood insurance in participating communities beginning in June 1970. By design the insurance program was highly subsidized for existing buildings in flood prone areas, but the rates were also subsidized for properties outside of the flood- plains to encourage the purchase of flood insurance. Older New Jersey natives who were “shore” people, will certainly remember the kinds of vacation structures in the 1950s- 70s. Except for the uber-rich, the structures were of inexpen- sive construction since they could wash away on the whim of named storms: hurricanes. Even winter storms could CONT I NU E S ON PAGE 34

expansion of flood hazard areas even though the attempts were to control rivers from causing proper- ty damage and loss of life. By the 1930s, increased build- ing along waterways and the coast increased the potential of catastrophic flooding which result- ed in the private insurance indus- try abandoning the providing of

“Vacation home mortgages

heretofore had not been available due to the risk for the lender.”

flood insurance. The 1950’s saw the Federal Government establish Disaster Relief which included damage by floods. However, involvement of the government for coastal flooding (hurricanes primarily) did not begin until 1955

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