As risk rises, costly coverage causes thousands of Texans drop flood insurance

A year after a deadly flood devastated the Texas Hill Country, the region is still rebuilding. 

The process has been costly; The July storms caused more than $18 billion in damage. 

And most victims are rebuilding without flood insurance. 

Only about 7% of homes in Texas have flood insurance; in Kerr County, about 2% of homes are covered.     

For nearly 70 years, the Hill Country Arts Foundation has been a creative hub in the city of Ingram — offering summer camps for kids, hosting art galleries and putting on productions for the community on its outdoor stage, located just feet away from the Guadalupe River.

"We did not have private flood insurance," said Geri Magnell, a member of the foundation's board. "The water has never come this high. We've never seen anything like it."

Last July's flood gutted the center's buildings. And without insurance, the foundation is relying on donations to rebuild. Even once it reopens, Magnell said she's not sure the center will be able to carry flood insurance. 

Like so many other businesses and homes, cost has made coverage out of reach. 

In just the past year alone in Texas, 45,000 policies have been canceled — a 7% drop.

National Flood Insurance Program no longer sustainable

Across the country, home and businessowners are increasingly being priced out of flood insurance coverage. The story dates back decades.  

In 1965, Hurricane Betsy hit the Gulf Coast, becoming the first  hurricane to cause $1 billion dollars of damage in the U.S. At the time, private flood insurance was rare. In 1968, the federal government stepped in and started selling flood insurance managed by the Federal Emergency Management Agency, or FEMA. 

But after a series of expensive hurricanes — Katrina, Sandy, Harvey — the National Flood Insurance Program went into debt. Today, it's more than $22 billion in the hole.

In 2021, under the Biden administration, FEMA overhauled how it set pricing for flood coverage. Prior to the change, if customers lived in the same flood zone, they paid about the same. Under FEMA's Risk Rating 2.0, rates are more individualized, with a home's value, elevation, distance from the water and rebuilding cost all factored into the price.

At the time, FEMA said the new risk-based system would be more fair. But under the new system, average premiums rose — pushing more people to drop coverage.  

Several U.S. senators, including Texas Republican John Cornyn, are backing a proposal to revert back to the old system. In a statement from earlier this year the lawmakers said each year this new system is in place, "participation continues to erode, the insurance pool weakens, and taxpayer exposure grows." 

But not everyone believes doing away with Risk Rating 2.0 is the way to expand flood insurance coverage. Zoe Middleton, a climate policy expert at the nonprofit Union of Concerned Scientists, called the idea "short-sighted" and "dangerous."

Middleton said the issue is not how FEMA calculates risk, but that people can't afford insurance. 

"What Congress can do and what they should do is to mandate affordability," Middleton said. "It's people on fixed incomes, it's folks with disabilities, elderly folks, low to moderate income families, that is essential to making sure not only that individuals recover, but that entire communities are able to recover." 

Earlier this year, President Trump set up a review council to assess how FEMA spends money and operates. The council's final report found that while Risk Rating 2.0 needs improvement, it should stay in place. 

One recommendation is to bring in private insurance companies to take over policies, and rely less on the federal program alone. Experts say the impact of that move on price could vary.   

The I-Team reached out to FEMA with questions about the National Flood Insurance Program and Risk Rating 2.0. In an emailed response, FEMA highlighted its efforts to help Texas following last year's flooding:

"To date, the administration has provided more than $268 million in total federal assistance to drive the state's recovery. This includes over $238 million in FEMA assistance to support essential home repairs."