SAN JUAN, PUERTO RICO – One of the most eye-opening statistics in the aftermath of Hurricane Maria's roar through Puerto Rico is that there were just 5,675 federal flood insurance policies on an island with nearly 1.57 million housing units.
That means less than one-half of 1 percent of homes were covered. Many will instead try to tap low-interest federal loans to rebuild.
The dearth of flood policies in Puerto Rico means the federal program will be required to pay little of the perhaps $85 billion in privately and federally insured losses from Hurricane Maria; the total includes not just homeowners' flood claims, but also, for instance, property damage. most of the losses occurred in Puerto Rico.
But if Maria doesn't require major outlays from the federal flood insurance program, the storm has underscored the issue of the affordability of these policies on the island and elsewhere.
Some played the odds.
"The probabilities are not very high that a hurricane will hit," said Julio Soto Quijano, a jeweler. "Why have the expense year after year if there is no assurance that you will face the problem?"
Jailyn Colon Reyes, 37, saw one room flooded and a garden wall damaged. With no insurance, she expects to pay almost $2,000 out of pocket for repairs. But that doesn't mean she'll be buying a policy in the future. "Our income doesn't allow us to pay for insurance," Colon said. "You've got to pay the light bill, the water, medicine, food, gasoline, additional expenses."
This isn't a problem limited to Puerto Rico.
The latest federal flood insurance data, as of July 31 before the storms hit, shows a little more than 4.9 million active flood policies in a nation of 135 million housing units, or about 3.6 percent. More than a third of them, 1.7 million, are in Florida. Texas was a distant second with 584,637 policies.
The coverage is required for homes in a designated flood zone, but millions of homeowners who live near bays and rivers or inland from coastlines assume they don't need such policies. But a lot of the damage in Puerto Rico, for instance, came from rain-swollen rivers.
The upshot: More households should have the insurance, but many can't afford it — and the federal program is at a breaking point in any case, said the Trump administration, which has proposed revamping the National Flood Insurance Program.
"The NFIP is simply not fiscally sustainable in its present form," Budget Director Mick Mulvaney wrote in an Oct. 4 letter to congressional leaders, noting $16 billion in flood losses from this year's storms.
Moreover, he warned, the flood insurance program's administrator — the Federal Emergency Management Agency — would later this month exhaust its financial resources and tap out its $30.4 billion borrowing authority.
The letter proposed creating a means test to determine what homeowners would pay, which could mean subsidized policies for some and higher costs for others.
The administration also wants to open the door wider for private insurers to compete. That's something insurers have wanted, albeit with some caveats. They want to make the government primarily responsible for issuing policies in the highest risk areas, and for subsidizing policies for low-income homeowners.
Changes to the federal program in 2012 allowed some private insurers to compete with the federal program in zones where flood policies are mandatory. But banks that issue mortgages have been reluctant to veer away from the federal program.
"We don't want to see it disappear," Tom Santos, a vice president at the American Insurance Association, said of the federal flood insurance program. The industry also wants to expand its offering of supplemental flood insurance policies to cover pricier properties that would exceed the maximum federal flood policy claim of $250,000.
In Puerto Rico, affordability is blamed for the small number of insured houses, especially for ramshackle wooden structures like those outside the capital of San Juan; they collapsed like toothpick toys when Maria swept in.
"Usually these properties are poorly built, not even up to code," said Charles de Jesus Cruz, an architect.
But sturdier housing might not follow in Maria's wake.
"The problem will be if FEMA comes in and gives them money. They'll rebuild the same thing, and in a flood zone," he said.
In stark contrast to homeowners, many Puerto Rican businesses, especially those engaged with the broader U.S. marketplace, had property and casualty insurance in place before Maria hit. Smaller entrepreneurs and shopkeepers in Puerto Rico can seek low-interest loans from the Small Business Administration to rebuild, but these are often difficult to obtain without strong record-keeping to show a positive cash flow.
Insurance industry analyst AIR Worldwide estimated that insured losses in Puerto Rico, for federal and private flood and other policies, could run between $40 billion and $85 billion. Uninsured losses are far higher given the damage to roads, bridges, the power grid, the sanitation system and lost tourism revenue.
The Trump administration on Tuesday asked Congress to make a $4.9 billion low-interest loan to Puerto Rico for immediate recovery efforts, and asked government agencies to provide an estimate, by Oct. 25, of long-term costs expected for the commonwealth's recovery.