They take the premium from thousands of policies,and invest that money in another financial product. So the insurance underwriter may pay out moreclaims than they make in policy premiums. But they have invested all those premiumsin a high interest investment scheme, so they make their money outside of the original insuranceproduct. Insurance in this example is a way of creatingcash flow to be used in more lucrative investments.
We've got to understand thatthat we're way underinsured in the number of properties thatshould should have it. There is a huge market outthere in the high risk area. We estimate only a third of theproperties have either an NFIP or private sector flood coverage. There's a market there. So we want todo what we can to encourage the private sector to to also take part inmanaging the flood risk of the of the nation's. Private insurance companies arealso able to insure at a higher rate than the NFIP. That means more protection for homesworth over two hundred and fifty thousand dollars. But that could meanmore valuable homes built in riskier areas. For example, the average value of ahome in Miami is close to three hundred and sixtysix thousand dollars.
That's the same Miami thatfloods during high tide. A report by Risky Business put 15billion to twenty three billion dollars worth of existing property inthat area underwater by 2050. I don't think Miami is goingto be underwater in my lifetime. That's not saying that we should addressit now because it's not going to get any better. You know that kingtides are going to get worse. If I can't get insurance andthe quality of life goes down. I'm not a fool. I'mnot going to stay here. But I hope it doesn't come to that. Clearly, without the National FloodInsurance Program, there would have been far more development in the highrisk area and would have been far greater losses withoutwithout the program. Has the program stoppedany unwise development? Of course not. But our floodplainmanagement regulations do save one hundred million dollarsin losses avoided. The NFIB also encourages communitiesand individuals who have experienced multiple flooding events to work on resiliencyand aids them if they are considering a buyoutprovided by FEMA. It's also has to be determined what iswhat is still do from from a mortgage standpoint and that that home, ifnot fixed, would have a lower probability of of being sold. You can't convince me that property valueshave gone down and you can't convince people that people don't want tobuy homes and live here because they're buying like crazy. There's noincentivization to move if you're paying rates that aren't actually basedon risk, they're based on political judgment. Investing in the resiliency required by theinsurers can save lots of money and heartache. You can get intothese communities, you can educate them, you can inform them and help themunderstand what better building can do. That's really one of the keys. For every dollar spent on beingresilient, you save seven dollars and recovery. Closing the insurance gapwill certainly help protect property owners living in harm's way. But that could just be aBand-Aid for the much larger issue. Both the East and West coasts willbe directly impacted by flooding from sea level rise. The second piece in this issomething that no private marketplace would ever do is to put in placea grant program that requires at risk structures, particularly those that havehad repetitive losses and says we're going to pay not just the valueof the structure, but buy out the entire piece of real estate and dedicateit as open space in perpetuity.
