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Are insurers prepared to cover damage from Florence?

Even as development continues near the coasts, some national home insurance companies are pulling away from those areas, leaving home and business owners to rely on government-subsidized flood insurance. But the potential damage from Tropical Storm Florence may require additional money—from taxpayers who live far from disaster-struck areas. ProPublica’s Talia Buford joins Hari Sreenivasan.

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  • HARI SREENIVASAN:

    The threat of storms like Florence or Harvey and Maria has not stopped people from building along the coast. But some national home insurance companies have taken pause and have been pulling out of flood prone coastal areas. Some areas are turning to government subsidized flood insurance programs but there are new concerns even those funds will not meet insurance demands from superstorms.

    Joining me now is Talia Buford who reports on the environment and civil and human rights for ProPublica and is also co-host of the PBS Digital Studios Climate Change Program — 'Hot Mess.'

    Thanks for joining us. As we think about the repercussions of what Florence is doing to the Carolina coastline right now, give us the lay of the land of how people are protected, what kind of insurance [do] they have?

  • TALIA BUFORD:

    Well, we talked to insurers along the coast of North Carolina. Basically they told us that most of the big insurers that you've heard of, the ones with commercials and big agencies around the country, they don't right East of 95. That's kind of the highway that runs and can divide —

  • HARI SREENIVASAN:

    That's a lot of land

  • TALIA BUFORD:

    That's a lot of land. It's not just the outer banks, it is a kind of coastal communities that are just touch the water and they say that they are not able usually to get some of these bigger insurers to insure them against wind storms like hurricanes and tropical storms.

  • HARI SREENIVASAN:

    Now there's the National Flood Insurance Program that people are somewhat familiar with where, if private insurance doesn't pay it, you have to have it anyway if you're going to put a house on the coast. But you're looking at there's even a bigger gap and states are filling that gap. So what kind of programs, what kind of plans are those?

  • TALIA BUFORD:

    So these plans are kind of state versions of the National Flood Insurance Program. But instead of covering flood, they cover wind. And they were kind of created during the '60s and afterward to inoculate cities from blight and also give people who live on the coast, a chance to get reasonable insurance. So it's kind of a way just to make sure that if you live on the coast, you have a place to get insurance, even if the private companies won't come out and ensure you.

  • HARI SREENIVASAN:

    That's supposed to be the free market at work, right? It's supposed to be that listen, if the price is too high for me to insure this property, then maybe I don't build the property.

  • TALIA BUFORD:

    And that's one of the things that our story says like we it's kind of muting the signals that we would normally get from the free market. I think there is an argument that you know, there are people there who have been there for decades and generations and they should be able to get insurance. Sure, but it also means that maybe we should start considering other opportunities to move them away from the coast or to kind of at least not encourage more development in that area.

  • HARI SREENIVASAN:

    I can totally understand six generations of family but you also see a lot of new building that's going in right now and those are not people who have been there six generations. This is coastal property, I'm assuming it's worth a ton of money for real estate developers.

  • TALIA BUFORD:

    Absolutely. I mean and it's worth a lot of money for the state of North Carolina too. I mean, you wouldn't want to stop development on a place that is bringing thousands and thousands of people to your state every summer. I mean, the Outer Banks is a huge vacation market and you don't want people to stop coming there because they don't have some of the amenities.

  • HARI SREENIVASAN:

    This is in the wake of Harvey, where we saw devastating losses, huge amounts of money that were being spent, and a lot of this was uninsured losses. What do the Carolinas, what do these different state plans, whether it's New York or other places have in store and can they deal with a big superstorm or they're going to bounce a check?

  • TALIA BUFORD:

    Sure. So what we looked at, we looked at North Carolina specifically and it happened to be that you know, Florence a lot more timely. But for North Carolina specifically their plan has about $3 billion that they can pull from and that's with reinsurance, that's with their own reserves and then that's also with a $1 billion assessment they can put on all other companies. The thing that makes North Carolina interesting is that they also have a provision that allows them to basically bill every insurer in the state or every person who gets insurance in the state, Property insurance in the state, to pay off if they run a deficit.

  • HARI SREENIVASAN:

    Basically taxpayers in the rest of the state are going to foot the bill for whatever happens on the coast even though they don't have the beachfront property?

  • TALIA BUFORD:

    Yeah, pretty much.

  • HARI SREENIVASAN:

    And this is also you know, it's not in a vacuum. This is in a legislature that has actively denied climate science or at least wants to include other things besides climate science that says the sea level is rising, this is going to be a problem that gets worse, right?

  • TALIA BUFORD:

    Right. Right. And climate scientists are saying that the kind of storms that we're seeing the Harveys the Florences the Marías they are going to be more common. We're going to see these stronger storms developing more quickly, we're going to see them acting in ways we haven't normally seen them, you know, kind of standing over states for days or weeks at a time possibly. So I mean, you're going to see a lot of different changes from hurricanes and a lot of the states just aren't prepared for it.

  • HARI SREENIVASAN:

    All right. Talia Buford [from] ProPublica, thanks so much for joining us.

  • TALIA BUFORD:

    Thank you.

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