The revelation that the U.S. Federal Emergency Management Agency has redrawn the floodzone maps to favour high-end condos elicited a comment from one broker, who questions the value of the current proposals on flood insurance definitions in Canada
“No one in Canada should fool themselves about selling flood insurance here as I've not seen a single proposal that overcomes the problem of adverse selection,” writes Paul. “In fact most don't even know what adverse selection is.”
FEMA came under the spotlight after expensive condos hit hard by hurricanes Ivan and Katrina were either transferred to a lower-risk flood zone or rubbed off the map altogether.
Island Tower, a beachfront condo in Gulf Shores, Ala., collected more than $260,000 in flood insurance claims for two major hurricane events, but is one of 66 Gulf Shores properties to be placed into a lower-insurance risk category. (See original story, ‘
FEMA redrawing of floodzone raises eyebrows’)
While once Island Tower’s condo association paid $143,190 a year into the National Flood Insurance Program (NFIP), it is now enjoying a $8,457 annual premium under its new lower-risk flood zone classification — a savings of 94 per cent.
But the NFIP is a program that simply doesn’t work, says Paul, and shouldn’t be emulated here.
“The NFIP is not insurance no matter what they call it as the claims have always exceeded the premiums,” he says. “If it were a real insurance program it would have gone bankrupt years ago. It is a taxpayer funded program to subsidize water loses.”
