the power of hope versus odds
government and natural disaster
Even those who belittle projections on global warming have a difficult time ignoring higher tidal flows and warmer weather, both of which are relevant during a tropical storm. Here in Annapolis, we see higher tides kissing the bottoms of docks weekly, along with water accumulating on the downtown streets damaging commercial interests away from the waterline in this small city located at the confluence of the Severn River and Spa Creek. Water levels simply are higher.
This may not sound like much of a big deal to you but, as I said in a piece on 10 August
(https://cynthiawatson.substack.com/p/floods-and-floods), you are paying for it, whether you live here in Eastport, western Pennsylvania, or Bozeman. Leveraging risk and resources is how we run so much of our lives. It’s certainly how Americans address that undesirable intersection of flooding, businesses or homes, and insurance claims.
Hurricane Helene reminded us all that nature does her thing regardless of what we have seen before. The idea that the equivalent volume of water to Lake Tahoe dropped on the southeastern portion of the United States last week is simply hard to fathom. All of us can be forgiven to not comprehending that volume but we tend to assume it has never happened ever before or cannot again.
Probably not the case. I don’t have a specific hurricane to cite but history of this planet is billions of years (yes, really) so the likelihood of massive flooding because of a hurricane whipping north from the Gulf, meeting the mid-Appalachians, ultimately disgorging 40 trillion gallons of rain all the way along its extensive path probably happened before humans lived there. All of us know Katrina 2005), Hazel (1954), or the 1938 New England storm, to name only three, were devastating and costly. It seems likely it could happen again, too.
Sadly, the destruction was also predictable because nature in any of its manifestations can be a most powerful force. Kansas City had a half-hearted trickle that became a torrent, ripping out steel bridges as it overflowed and powered through the staid central portion of that city on 12 September 1977 following several days of rain. The Army Corps of Engineers called the Kansas City event a “once in a thousand year flood”. The time span indicates it unlikely but we are seeing incredibly destructive events cropping up more and more often across our world, even if not in precisely the same local.
Helene’s storm surge damage will require repair for 25,000 homes in the sunshine state alone, running a tab of at least $5.6 billion in Florida where overall residential housing is valued at well over four hundred billion dollars. Florida has lots of coastline with people increasingly concentrating along those beaches where they face repeated dangers from both the Gulf and the Atlantic sides. Asheville, the small towns of Georgia, South Carolina, and Tennessee will need homes and businesses reconstructed along with infrastructure of all types, ranging from water treatment facilities to roads to rubbish depositories. This tropical event upended the lives of millions of Americans as did Hurricane Sandy along the Jersey shore twelve years ago next month.
Substitute “fire damage” for “storm surge damage” and up pops California and the array of states confronting a similarly challenging private sector insurance market where wildfires are destroying habitats fairly regularly. Fires across Utah, Colorado, Montana, Idaho, Oregon, Washington, New Mexico, Arizona and California riveted the country at some point over the past generation as we witnessed people losing everything to Mother Nature’s fury when winds shifted to bring fire into their communities, regardless of prior safe position. Like those in Maui last year, the victims of this type disaster can only watch helplessly as the fires spread until they burn out for lack of fuel often rather than because valiant firefighters defeated them.
Insurance is our fall back against these events, weekly or “thousand year” in frequency. In our free market system, the choice to get insurance is often a choice or a mandate to satisfy the mortgage company (or business lender) but still a decision related to the new owner’s/renter’s/businessperson’s risk tolerance and financial condition. But, insurance has traditionally been available.
Private insurance companies, however, are increasingly less interested in participating in some markets because the frequency of storms (or whatever the danger) is escalating. The damage severity is undercutting the market’s ability to produce adequate resources to meet claims, much less produce profits for shareholders. Certainly regulatory changes, particularly in California, exacerbate the insurers’s decisions to find their financial risk too high versus the return on their investment. Private insurers, of course, are businessmen and women rather than purveying public goods in the form of reconstruction.
Additionally, one can get homeowners, flood, fire, or differing types of insurance. The recent pressures on flood insurance will make the Helene-driven claims much more restrictive in their payouts. This results from more claims over the past few years as storms became more destructive.
Like so many things, the insurance market is complicated. The Federal government offers coverage regardless of race, gender, ethnicity, to citizens in hopes of mitigating the financial risks but these are optional programs many homeowners choose not to opt to purchase. Not every program is available as each policy has fine print with some markets simply not insured by the federal system either. Someone trying to buy a house on a postage size island in the middle of the Mississippi River probably won’t get even federal flood insurance as the risks are too high to insure the person (even though the River dries a great deal these days as well).
Federal emergency aid after these tragedies is a given if the president declares a disaster for the relevant area, regardless of how dubious the homeowner’s decision. Governors trigger Uncle Sam’s help by requesting assistance for specified locations in their states, if not the entire state, as a disaster area which then allows the President to mobilize FEMA and other portions of what is now a well-oiled machine. Presidents have the right to ignore such requests but that is rarely done since the needs are humanitarian in nature. Federal dollars go to those who apply for the aid regardless of the individual’s political affiliation, gender, etc. as long as the request results from the recognized disaster.
Following Helene, however, rules on what types of assistance is available are more restrictive, thus lowering the support claimants will receive.
One might wonder why would someone to rebuilt along the beach near Tallahassee where the 25,000 homes need repair or in the western plains of Kansas where E5 tornados wipe out Greenberg in 2007? Their answer is likely that it is home. Yet one must ask whether it is magical thinking to assume it won’t happen again or that some sort of insurance and/or assistance will be available to them in case of a crisis?
Probably the latter. That is the safety net that government, when it’s all said and done, offers if private sources fail to provide options. So many people who will rely on aid—some from insurance or other funding from private not-for-profits like the World Central Kitchen or Americares—will be your and my tax dollars that government offers in compassion for the afflicted. This money is not an entitlement, as we so often refer to the social safety net, but is every bit as desperately needed following a natural disaster. It may not cover everything for rebuilding but will be vital for many Americans.
Our current political debate includes conversation about whether this should continue. Many Americans believe government ought not provide these supports but I ask who else could help on the scale we increasingly confront? The private sector does not have to provide for all; its work is purely voluntary in every sense as a transaction, if insurance is sold to a family or building owner. But the need can too often be real, immediate, and desperate. As I noted on Monday in “Willful ignorance, facts attached”
(https://cynthiawatson.substack.com/p/willful-ignorance-facts-attached), whole segments of our society depend on what government does daily or in crisis, if not both. Mostly those affected by fire or tornado need the financial support (particularly in a crisis, obviously) but they also need the other small, temporary supports to bridge the vicissitudes of things they could not control.
I am not arguing for permanent support for everything in life. I am suggesting, as citizens, that we consider how harsh nature’s wrath can be, then think well of those who work to alleviate the damage to families, towns, and states. Those providers may be insurance adjusters, firefighters, rescuers, Americares pilots, or FEMA personnel.
Where would the people of Maui, South Carolina, or hamlets in the hollows of Tennessee be without these providers, regardless of the source? Government is far from perfect but it provides for those confronting the worst days of their lives—something we see too often of late.
I welcome your thoughts, rebuttals, challenges, or reflections on this or any column. Have you received help from the government following a crisis? How did it help or am I off base?
Thank you for your time today. Thanks also to those who contribute as subscribers. I appreciate your financial contributions so greatly.
It was a cloudy morning but I managed to capture this late summer blossom from the famous fuschia we discussed a couple of weeks ago.
Be well and be safe. FIN
Lidia Denkova and Katherine Kallergis, “Sizing up Hurricane Helene’s expected multi-billion dollar damage, effects on insurance market”, RealDealDaily.com, 26 September 2024, retrieved at https://therealdeal.com/miami/2024/09/26/hurricane-helene-could-strain-fl-insurance-real-estate-market/
Jean Eaglesham, “Homeowners Hit by Helene Are in for an Insurance Claim Shock”, Wall StreetJournal.com, 5 October 2024, retrieved at https://www.wsj.com/finance/homeowners-hit-by-helene-are-in-for-an-insurance-claim-shock-60ae5519?mod=latest_headlines
“How a federal disaster is declared”, FEMA.gov
“40 trillion gallons of water fall before, during Helene”, Associated Press.com, 1 October 2024, retrieved at https://www.wyff4.com/article/helene-record-rain-40-trillion/62463264
So depressing in so many ways. I understand market economics but this is beyond that I. So many ways. Thank you. Go sit on a pebble for me, please, since rocks all taken.
The insurance aspect is one of concern. And you're correct that insurance companies are becoming more selective in what they offer and for what price to ensure their shareholders are not left with nothing after a one-in-a-thousand year event takes place. So many angles to all this to include insurance companies dragging their feet to provide the monetary relief to the insured who have paid into those plans. Lots of stories about the "fine print" being applied to absolve insurance companies from having to pay at all. Or, lengthy court battles where the only real winners are the lawyers. At some point, insurance companies may just say no....regardless of the cost / price to insure a property. When that happens, and people can't get mortgages, it's going to change the entire dynamic of home ownership....especially for those who can't afford to pay cash for a home.
That kind of leads into the future of traditional home ownership in general. It's already hard enough for some to qualify for home mortgages or new build contracts. The recent trend is corporate home buying where companies are on the look-out for homes for sale then purchase them (sometimes above market value because they have the cash to do so) then they turn them into Air B&Bs or VRBOs which are profit generating ventures. Some homeowners are also realizing the value of their property as a vacation rental vs. a traditional home. It's having a big impact on the service and retail industry in those areas as well.
Three specific examples: McCall Idaho (about 2 hours north of Boise) sits on the beautiful Payette Lake. It's a mountain town. Stunning in the summer with cool temps and lots of activities. Equally beautiful in the winter with winter carnivals, ice sculpting and excellent snow skiing nearby. For decades, Boiseans have had cabins and second homes up there and houses were plentiful for rent or to buy with prices being manageable for those who wanted to live there year round. But in the past 10 years, as Boise has grown, many of those homeowners have decided to rent their houses out as vacation properties for pretty steep prices. The service industry and retail workers who work in McCall are being priced out of the town and having to look elsewhere for affordable housing....sometimes up to an hour or more away. Local restaurants, grocery stores and other retail business are finding it hard to gain and keep employees who just can't afford the increased cost of living and/or the commute. Tourists and vacationers complain about the lack of customer service, long wait times for food, etc. Same thing has happened in Jackson Hole Wyoming and the Sun Valley area of Idaho.
Just recently, what used to be a small, quaint, coastal sleepy-hollow of a town north of Pismo Beach California has experienced the same. Cayucos California used to be a "traditional" town with home ownership and a small-town feel. But lately, the creep of corporate home buying along with the excessively rich have put their focus on this beach town.
From the Cal Coast News.com: "For the last ten to fifteen years the five and ten-percenters have done their best to transform this last little beach town with a smokehouse and a spattering of ne’er-do-wells into something more appropriate for people with so much money they don’t know what to do with it and are so deeply ensconced in luxury they’ve lost all track of reality and humanity."
Growth and expansion are inevitable. I left Boise in 1986 and returned 36 years later to a city I didn't recognize. Population has doubled in that time and the urban sprawl from Boise west toward the Oregon border (known as the Treasure Valley) shows no signs of abating anytime soon. Farmers are seeing more value in selling their 100 acre parcel to developers who replace sugar beets and soybeans with 1/8 acre two-story homes close enough to neighbors that you can just share sugar by passing it from one kitchen window to the other.
Natural resources are also being stretched. When one of my dad's old hunting buddies heard we were coming back to Idaho to retire he said: "If you go up into the mountains, better take your own rock to sit on... all the rest of them are taken." And he wasn't wrong. Sad to see "no-tellum" places I used to visit in my youth packed with two or three 5th-wheel trailers, 4-wheelers, etc.
All of this is putting strain on systems across the board to include city services (more taxes), higher home prices (tougher to get mortgages) and also on the insurance industry (forest fires encroaching on & destroying homes built in areas where there were none before).
Approaching my twilight of life, I won't see the real damage being done. I hope we come to our senses soon and realize that there should be more to life than accumulation of wealth. If not, our only choices may be the Saturday Night Live option of "living in a van, down by the river..." if we can afford the insurance... and hoping it doesn't flood.
https://calcoastnews.com/2021/07/the-one-percenters-are-headed-to-cayucos/