Privately owned insurance companies are not stupid; they don't sell policies to homeowners in flood-prone areas. It was too risky before climate change kicked in, and it's going to be much more risky in the age of rising sea levels. The housing market in flood-prone areas has been supported by the government's National Flood Insurance Program, which sells cheap plans to millions of homeowners. And here we have a perfect example of how the "free market" really works. It's not about enterprising individuals or the raw law of competition rewarding the hardest workers and the best ideas. It is about the government transforming social wealth into profits. Real estate agencies, banks, investment banks that securitize mortgages, and so on—these are privately owned businesses that benefit from the government's cheap insurance policies for homes in risky areas.
From CBS News' business website:
Almost 7 million coastal homes are at risk for damage to storms and hurricanes, representing a reconstruction cost of more than $1.5 trillion, according to a June report from CoreLogic. Texas is ranked as the third-riskiest state by the real estate analytics firm, which said it has 536,000 at-risk homes. (Florida and Louisiana ranked first and second for the most at-risk properties, respectively.)Revenue wise, NFIP, was doing just fine until 2005, when it received the bill for Hurricane Katrina ($118 billion). After that, 4 of the 5 most expensive storms in US history occurred. This has put NFIP deep into debt ($25 billion). And the bill for Southeast Texas is going to push it deeper into debt. This storm might cost NFIP a wowing $40
Some politicians are considering privatizing NFIP, which will only mean no cheap insurance policies for millions of homeowners in Texas, Florida, and Louisiana. The government might go back and forth on climate change, but money certainly will not. Climate change is going to be very expensive.
