Being a new immigrant family to the United States, there's no doubt that I need to learn a lot of things on an almost daily basis! Being a first time homeowner in the US, I was totally inundated by all the processes and paperwork I needed to go through, and then I realized that I only had one day left to purchase my homeowners insurance before the transaction closing date! Long story short, I got my insurance policy and moved into the new house in the fall of 2016. Since then I did the same as many homeowners do – I saved the insurance policy in the drawer and never read it again unless there was a possible claim.
That is one part of my life, the other part is that I'm part of Swiss Re's Property team and work on the natural catastrophe protection gap initiative. Coming from China, a developing country which is exposed to all kinds of natural catastrophe perils, I am not new to the topic of the protection gap - the gap between economic loss and insurance loss. However, I was surprised to see how devastating the 2017 Hurricane Harvey was for homeowners in Texas. Harvey was a category four storm that triggered widespread damage and flooding along the Gulf Coast.
According to the latest Swiss Re sigma report, total economic losses from Harvey were around USD 85 billion, and insured losses were USD 30 billion. About 200,000 homes in Texas were inundated and 500,000 vehicles damaged. Around 80% of homes in the Houston metropolitan area are uninsured against flood risk, pointing to a large protection gap.
There are several reasons why many homeowners lack the necessary flood insurance to protect their homes. One is the misconception that homeowners insurance covers flood damage when, in fact, it typically doesn't. I was one of the people that had that misconception when I first opened my homeowners insurance policy. Another reason is that lots of property owners take one point of view, such as a published federal flood map, and they use that to determine whether they’re in a high-risk flood zone or not. In fact many of the homes that flooded during the record-making Hurricane Harvey were not in an area designated by the federal government as high-risk flood zone. That is because flood not only can arise from storm surge or rivers, but also from heavy rainfall and accumulation of water in low urban areas. By using Swiss Re's proprietary worldwide hazard map CatNet, everyone can look up the risk assessment of their home by simply putting in the address.
Luckily my home is outside the high-risk flood zone based on FEMA (Federal Emergency Management Agency) flood map, however am I safe from flood risk? The answer is not 100%, because all it takes is a few inches of water to cause major damage to my home and its contents. Now my homeowners policy is up for renewal, flood insurance is definitely on my list. I also believe with tremendous effort from the insurance and reinsurance industry, homeowners like you and I will enjoy more flood insurance options with more affordable prices, so that we can close our own protection gap altogether.
Category: Climate/natural disasters: Climate change, Disaster risk, Floods/storms, Resilience
Location: United States