Who Will Pay for Hurricane Irene? (August 2011)

As Hurricane Irene hit landfall, the first priority is to make sure no one is hurt. Disaster preparedness services have done a very good job at making sure the debacle of Hurricane Katrina does not repeat itself. Results are evident as one looks at the very low number of casualties. Hurricane Katrina killed 1,300.

(Sources: NOAA).

Soon, the question of who will pay for the economic losses due to Hurricane Irene will be central.

As a Category 1 hurricane, Irene should not inflict massive wind losses. More likely, flood damage will be the most important part of the losses. In the US, residents can purchase flood insurance through the federally-run National Flood Insurance Program (NFIP), which was established in 1968.

Today, the number of residents in some of the affected areas who have such coverage in place is as follows (in parentheses I put the dollar figure that represents the total amount of NFIP insured property in the state):

Vermont: 3,600 ($670 million)
Rhode Island: 16,000 ($3.8 billion)
New York: 163,000 ($39.5 billion)
New Jersey: 230,000 ($52 billion)
Pennsylvania: 65,000 ($12 billion)
Delaware: 25,000 ($6 billion)
DC: 1,800 ($320 million)
Maryland: 69,000 ($17.8 billion)
Virginia: 111,000 ($26.6 billion)
North Carolina: 136,000 ($31.4 billion)
South Carolina: 200,000 ($48 billion)
Georgia: 97,000 ($23 billion)
Florida: 2,070,000 ($470 billion)

Clearly, many more individuals are not covered against flood losses. Who will pay then?

For media request, please contact Dr. Michel-Kerjan at erwannmk@wharton.upenn.edu