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Tuesday, October 18, 2005 - Page updated at 12:00 AM

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Lack of flood insurance in New Orleans to hit hard

The Washington Post

NEW ORLEANS — Many of the thousands of homeowners in the Lower Ninth Ward, one of the hardest-hit areas in the city, lacked flood insurance because the neighborhood was supposed to be relatively safe, local insurance agents and residents say.

Most of the area sits outside the "high-risk" flood districts designated on federal maps used for insurance. So, unlike homeowners elsewhere in this low-lying city, most in the Lower Ninth Ward were not legally required by lenders to buy flood coverage.

Those federal insurance maps, however, were based on a vastly mistaken assumption: that the levees and flood walls protecting the neighborhood would remain intact. When the levees were breached, the floodwaters ravaged countless homes unprotected by flood insurance, and many neighbors wonder whether anyone will have the resources to rebuild.

In communities all along the Gulf Coast, the shape and extent of the recovery — or neighborhood abandonment — may depend largely on who had flood insurance and who did not.

Hurricane Katrina was one of the most destructive storms to strike the United States in 50 years. Now some insurance experts say it is likely to be the most difficult from which to recover because a relatively small portion of the economic damage is covered by insurance.

Robert Hartwig, chief economist at the Insurance Information Institute, an industry group, has tallied insurance payouts after natural disasters in the United States, Western Europe and Japan. On average, private insurance covers 62 percent of the economic losses after natural disasters in those places, he said. But in New Orleans, he expects that insurance will cover less than half of the losses — and perhaps much less than that — because of the magnitude of uninsured flood losses.

"It will probably be the lowest percentage of coverage for a major natural disaster in the U.S. for the last half-century," Hartwig said. "Unfortunately, the level of coverage in New Orleans is likely to be somewhere between the Western countries and the Third World — where places can be affected for years, if not decades, by natural disasters."

Homeowners in the Lower Ninth Ward are becoming acutely aware of the difficulties of rebuilding without insurance. While insurance has begun paying for repair crews in more affluent areas, they fear their working-class neighborhood could become a ghost town.

"Lots of people will lose their homes," said Mary Hammothe, 48, a bank processor whose roof has a hole where her son cut his way out of the attic.

"I lost two jobs with Hurricane Katrina," said Cynthia Minor, 45, a pharmacy technician who lives nearby. "I don't have any money to rebuild. Who does?"

Among the key factors determining whether a homeowner buys flood insurance are the complex maps created by the Federal Emergency Management Agency and adopted by communities.

Banks are supposed to require that borrowers have flood insurance for homes that are inside designated "special flood-hazard areas."

About 61 percent of single-family homes in such areas in the South are covered by flood insurance, according to a Rand Corp. analysis cited by the Insurance Information Institute. By contrast, outside those areas, only about 1 percent of property is covered.

"Flood insurance is a very tough sell, and very few homeowners seek out flood insurance if it's not required," said Cheryl Small, president of the National Flood Determination Association, a group that represents companies that work with the flood maps.

Most of New Orleans is considered a "special flood-hazard area." But most of the Lower Ninth Ward, which is a few feet higher, is not.

"I had flood insurance, but they said I didn't have to," said Jessie Philson, an area homeowner who recently returned for a visit. To save money after retiring, she said, "we dropped it."

Seeing the damage for the first time, she burst into tears. "I don't know what we're going to do," she said.

Most of the Lower Ninth Ward and much of St. Bernard Parish, which was also hit hard, were not designated flood hazards because the risks were determined by calculating how much rain would accumulate on a given property in a "100-year storm event."

The mapmakers took into account ground elevations and pumping capacity in neighborhoods, but they assumed the levees would hold and that neither the Mississippi River nor Lake Pontchartrain would spill in.

Michael Buckley, deputy director of FEMA's flood-mitigation division, said that FEMA's New Orleans maps were based on assurances from the Army Corps of Engineers that the flood-control system would stand up in a "100-year flood" — that is, a flood so severe there is only a 1 percent chance of it happening in any given year.

Buckley said that had the levees held, most of the Lower Ninth Ward would have remained dry.

"While Katrina was considered greater than a Category 3 hurricane, the rain was not considered a 100-year event within the city," he said.

Copyright © 2005 The Seattle Times Company

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