We might be quick to complain about the non-stop rain we've had in Charlottesville recently, but we are fortunate to have been spared from much of the devastating effects of Hurricane Helene. Analysts have estimated the combined insurance losses to reach
$6.4 billion, but this number pales in comparison to the total damage estimated between
$30-
$160 billion. The system of government redistribution was quickly enacted, as North Carolina and other affected states were quick to invoke
major disaster declarations that allow affected residents to apply for grants to reimburse hurricane-related uninsured losses under
FEMA's Individual Assistance Program. Such a program also represents a commitment problem for the government, since it would be unreasonable to stop inefficient hurricane relief bailouts.
A related issue is the recent trend of
insurance companies pulling out of Florida and other regions highly susceptible to hurricanes. These companies have cited a disproportionate amount of litigation and hurricane-related property destruction that drive up their costs. The issue of adverse selection is likely at play, especially if property owners outside of well-established hurricane zones purchased insurance while withholding knowledge about the potential for severe hurricane-related damages.
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