Within days Mr. Goldman s firm offers flood insurance and, seeing extraordinary profit potential, provides for flood insurance within the 100-year flood plane. An economic boom takes hold throughout the community, for the homebuilders, the carpet weavers, cabinet-makers and real estate agents, not to mention the local banks absolutely ecstatic that loan growth is rising rapidly and lending profits are skyrocketing. The insurance companies also prosper mightily with flood insurance premiums soaring as new homes pop up all along the river. Soon, writing flood insurance becomes the most profitable business in town, especially after many years of drought. Mr. Morgan and Mr. Goldman, collecting enormous insurance premiums without ever facing payment for flood damage, are wealthy and, of course, revered as geniuses.
Young children aspire to sell flood insurance.
Soon, insurance companies are moving in from out of town to set up shops to write flood policies. The local banks, enamored by the extraordinary profits being garnered, begin peddling flood insurance as well. An active market develops in reinsurance, as some of the writers of insurance look to shift some of their growing exposure. Even the residents who have built homes along the river catch the flood insurance bug, investing in flood insurance companies as well as dabbling in the reinsurance market, pocketing some extra cash by accepting some risk of a catastrophic flood. The price and ease of availability of flood insurance incites an unprecedented building boom along the river.