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In August 2005, when Hurricane Katrina approached New Orleans, Mona Lisa Saloy felt secure in her home. As a poet laureate and author from the Seventh Ward, she had inherited an elevated, 110-year-old “double shotgun” house where she grew up. However, at the last minute, her friend’s vision of impending water led to her evacuating with an elderly neighbor and their dog.
Saloy was right to leave; her block was submerged under 9½ feet of water when levees failed. Her home required extensive repairs and rebuilding, a process that took nearly 15 years and much negotiation with insurance companies. She now acknowledges the importance of flood insurance, though many homeowners couldn’t afford it or didn’t see its necessity.
Data from the Insurance Information Institute shows Katrina’s unprecedented impact on insurance: it generated the largest single loss in history at $41.1 billion across six states. In Louisiana alone, 975,000 claims were filed, with 63% of the total payout going to flood damage covered by the National Flood Insurance Program.
The importance of flood and homeowners insurance was underscored by deadly flash floods in central Texas this summer. Despite these events, it’s challenging to gauge changes in coverage since Katrina due to data limitations and recent reforms.
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Flood insurance is critical but often insufficient; only 10% of affected homeowners had it at the time of the storm. Homeowners frequently assume federal aid will cover them, leading many without flood insurance.
Research by Jeremy Porter from First Street shows that while 28,000 properties in New Orleans face flooding risk, just 5,000 have active National Flood Insurance Program policies. Federal estimates undercount risk, indicating the need for better assessment methods.
Amy Bach of United Policyholders calls Katrina a “watershed” moment, presaging current issues like insurer pullouts and rate hikes across the nation. After Katrina, many insurers left Louisiana entirely; by 2015, only 2.57% of households received coverage from state or private insurers.
Flood insurance premiums have surged significantly in New Orleans—up to 303% in some ZIP codes over five years. Homeowners like Saloy pay nearly $6,000 annually for their new homes’ flood coverage, while others pay more than double that amount.
These trends indicate a failure to price risk accurately into the insurance market since Katrina. The crisis highlights the need for hybrid government and private solutions in addressing climate-related risks and insurance gaps.
