Question

After Hurricane Katrina there was considerable public outrage that many of the properties were not insured against flooding although they were insured against wind damage. What might explain these different approaches to​ insurance?

Answer 1

A. the risk of wind damage is potentially diversifiable, but the risk of flooding is not

Step-by-step explanation:

Based on the scenario being described it can be said that the best explanation for these different approaches would be that the risk of wind damage is potentially diversifiable, but the risk of flooding is not. Meaning that most insurance companies cover wind damage because it is most likely during a hurricane but flooding may be a unique situation which is not always covered by most insurance companies/policies.